Demand Reduction in Multi‐Object Auctions with Resale: An Experimental Analysis

Abstract

We analyse the effects of different resale mechanisms on bidders’ strategies in multi‐object uniform‐price auctions with asymmetric bidders. Our experiment consists of four treatments: one without resale and three resale treatments that vary the information available and the bargaining mechanism in the resale market. Resale markets induce demand reduction by high‐value bidders and speculation by low‐value bidders, thus affecting the allocation of the objects on sale. The magnitude of these effects, however, depends on the structure of the resale market. Features of the resale market that tend to increase its efficiency result in lower auction efficiency and seller's revenue.