2009): "Asymmetric Common Value Auctions with Applications to Private Value Auctions with Resale", Forthcoming, Economic Theory

We study a model of common-value auctions with two bidders in which bidders ’ private information are independently and asymmetrically dis-tributed. We provide three sufficient conditions under which we can de-termine whether a first-price auction generates higher or lower revenue than a second-price auction (for a selected equilibrium). Necessary con-ditions are given for the revenue-ranking result to hold in general. We further establish the observational equivalence between an inde-pendent private-value (IPV) auction model with resale and a model of common-value auction, when the resale mechanism satisfies a sure-trade property and the common value is the transaction price. Using this obser-vational equivalence and the revenue-ranking result for the common-value auctions, we provide an alternative proof of the revenue-ranking result of Hafalir and Krishna (2008) in the IPV auctions with resale. In gen-eral, revenue ranking may depend on who has bargaining power in the resale stage. We illustrate that the opposite revenue-ranking may arise (i) when one of the distribution functions does not satisfy the regularity prop-erty, or (ii) when the resale mechanism involves repeated offers and delay costs, or (iii) when the Coase Conjecture holds as in Gul, Sonnenschein