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How (not) to sell nuclear weapons

Jehiel, P.; Moldovanu, B.; Stacchetti, E.; (1996) How (not) to sell nuclear weapons. American Economic Review , 86 (4) pp. 814-829.

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We consider situations where a sale affects the ensuing interaction between potential buyers. These situations are modeled by assuming that an agent who does not acquire the object for sale incurs an identity-dependent externality. We construct a revenue-maximizing auction for the seller. We observe that: 1) outside options and participation constraints are endogenous. 2) The seller extracts surplus also from agents who do not obtain the auctioned object. 3) The seller is better-off by not selling at all (while obtaining some payments) if externalities are much larger than valuations.

Type: Article
Title: How (not) to sell nuclear weapons
Publisher version: http://www.aeaweb.org/aer/contents/index.php
Language: English
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: http://discovery.ucl.ac.uk/id/eprint/16635
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