Monopoly with Resale

This paper examines the intricacies associated with the design of revenue-maximizing mechanisms for a monopolist who expects her buyers to resell. We consider two modes of resale: to a third party who does not participate in the primary market and inter-bidder, where the winner resells to the losers. To influence the resale outcome, the monopolist must design an allocation rule and a disclosure policy that optimally fashion the beliefs of the participants in the secondary market. Our results show that the revenue-maximizing mechanism may require a stochastic selling procedure and a disclosure policy richer than the simple announcement of the decision to trade.