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Optimal auction with resale. (English) Zbl 1141.91412
Summary: This paper investigates the design of seller-optimal auctions when winning bidders can attempt to resell the good. In that case, the optimal allocation characterized by R. B. Myerson [Math. Oper. Res. 6, 58–73 (1981; Zbl 0496.90099)] cannot be achieved without resale. I find a sufficient and necessary condition for sincere bidding given the possibility of resale. In two-bidder cases, I prove that the Myerson allocation can be achieved under standard conditions supplemented with two assumptions. With three or more bidders, achieving the Myerson allocation is more difficult. I prove that it can be implemented in special cases. In those cases, the Myerson allocation is generated through a sequence of resale auctions, each optimally chosen by a reseller.

MSC:
91B26 Auctions, bargaining, bidding and selling, and other market models
91A40 Other game-theoretic models
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