Econometrica: May 2006, Volume 74, Issue 3

Speculation in Standard Auctions with Resale
p. 753-769

Rod Garratt, Thomas Tröger

In standard auctions resale creates a role for a speculator—a bidder who is commonly known to have no use value for the good on sale. We study this issue in environments with symmetric independent private‐value bidders. For second‐price and English auctions the efficient value‐bidding equilibrium coexists with a continuum of inefficient equilibria in which the speculator wins the auction and makes positive profits. First‐price and Dutch auctions have an essentially unique equilibrium, and whether or not the speculator wins the auction and distorts the final allocation depends on the number of bidders, the value distribution, and the discount factor. Speculators do not make profits in first‐price or Dutch auctions.

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Supplemental Material

Supplement to "Speculation in Standard Auctions with Resale"

We extend the model presented in the Note ?Speculation in Standard Auctions with Resale" by the same authors to environments with multiple symmetric-independent-private-value bidders and prove the results stated in Section 5 of the Note.

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