First-price auctions with resale: the case of many bidders

Abstract

We study first-price auctions with resale when there are many bidders and derive existence and characterization results under the assumption that the winner of the initial auction runs a second-price auction with an optimal reserve price. The fact that symmetrization fails when there are more than two bidders has been observed before, but we also provide the direction: weaker bidders are less likely to win than stronger ones. For a special class of distributions and three bidders, we prove that the bid distributions are more symmetric with resale than without. Numerical simulations suggest that the more bidders there are, the more similar the allocation is to the case without resale, and thus, the more asymmetric the bid distributions are between strong and weak bidders. We also show in an example that the revenue advantage of first-price auctions over second-price auctions is positive, but decreasing in the number of bidders.