Rent-seeking contests with private values and resale

This paper studies rent-seeking contests with private values and resale possibilities. With a stochastic success function, the resulting possible inefficiency creates a motive for aftermarket trade. Players’ valuations are determined endogenously when there is an opportunity of resale. We characterize symmetric equilibria. We assume that the winner has full bargaining power, but the results extend to other resale mechanisms. We show that resale enhances allocative efficiency ex post at the expense of more social resource waste since players compete more aggressively with resale possibilities.