If agents engage in resale, it changes bidding in the initial auction. Resale offers
extra incentives for bidders with lower valuations to win the auction. However, if resale
markets are not frictionless, then use values affect bidding incentives, and stronger
bidders still win the initial auction more often than weaker ones. I consider a first price
auction followed by a resale market with frictions, and confirm the above statements.
While intuitive, our results differ from the two bidder case of Hafalir and Krishna
(2008): the two bidders win with equal probabilities regardless of their use values. The
reason is that they face a common (resale) price at the relevant margin, a property
that fails with more than two bidders. Numerical simulations show that asymmetry in
winning probabilities increases in the number of bidders, and in large markets resale
loses its effect on allocations. 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.