Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/118057 
Year of Publication: 
2003
Series/Report no.: 
Nota di Lavoro No. 30.2003
Publisher: 
Fondazione Eni Enrico Mattei (FEEM), Milano
Abstract: 
We study sealed-bid auctions with financial externalities, i.e., auctions in which losers' utilities depend on how much the winner pays. In the unique symmetric equilibrium of the first-price sealed-bid auction (FPSB), larger financial externalities result in lower bids and in a lower expected revenue. The unique symmetric equilibrium of the second-price sealed-bid auction (SPSB) reveals ambiguous effects. We further show that a resale market does not have an effect on the equilibrium bids and that FPSB yields a lower expected revenue than SPSB. With a reserve price, we find an equilibrium for FPSB that involves pooling at the reserve price. For SPSB we derive a necessary and sufficient condition for the existence of a weakly separating equilibrium, and give an expression for the equilibrium.
Subjects: 
Auctions
financial externalities
reserve price
resale market
JEL: 
D44
Document Type: 
Working Paper

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