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American Economic Journal: Microeconomics: Vol. 3 No. 2 (May 2011)

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The Economics of Contingent Re-auctions

Article Citation

Brusco, Sandro, Giuseppe Lopomo, and Leslie M. Marx. 2011. "The Economics of Contingent Re-auctions." American Economic Journal: Microeconomics, 3(2): 165-93.

DOI: 10.1257/mic.3.2.165

Abstract

We consider an auction environment where an object can be sold with usage restrictions that generate benefits to the seller but decrease buyers' valuations. In this environment, sellers such as the FCC have used "contingent re-auctions," offering the restricted object with a reserve price, but re-auctioning it without restrictions if the reserve is not met. We show that contingent re-auctions are generally neither efficient nor optimal for the seller. We propose an alternative "exclusive-buyer mechanism" that can implement the efficient outcome in dominant strategies. In certain environments, parameters can be chosen so the seller's surplus is maximized across all selling procedures. (JEL D44, D82, H82)

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Authors

Brusco, Sandro (Stony Brook U, SUNY)
Lopomo, Giuseppe (Duke U)
Marx, Leslie M. (Duke U)

JEL Classifications

D44: Auctions
D82: Asymmetric and Private Information
H82: Governmental Property

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