Auctions versus sequential mechanisms when resale is allowed (Q6107394)

The paper is devoted to the problem of selling an object to a system of potential buyers with independent private values and participation costs. The authors present a simple motivating three-bidder example that, illustrates the performance of auctions and sequential mechanisms when resale is allowed. The basic formal model is discussed in Section 3, and in Section 4 the authors introduce the resale market to that model. More precisely, the authors analyze entry and bidding behavior in the auction and the (conventional) sequential mechanism, and show that both fail to generate revenue if there are too many potential buyers. In Section 6 the authors introduce the fully sequential mechanism and show that it is approximately optimal with a large number of bidders.