Can resale harm the original seller in a second-price auction?

Abstract

We consider second-price auctions with participation costs and investigate the revenue effects of a resale possibility. There are two potential bidders whose valuations are independently and identically distributed, and each bidder must incur a participation cost to bid in the auction. Due to these costs, there may be a resale opportunity in an otherwise efficient second-price auction. We show that when values are drawn from a uniform distribution, resale increases (decreases) entry of the lower-(higher-)cost bidder and decreases the original seller’s expected revenue.