How (Not) to Sell Nuclear Weapons

Philippe Jehiel, Benny Moldovanu, Ennio Stacchetti

Research output: Contribution to journalArticlepeer-review


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.

Original languageEnglish
Pages (from-to)814-829
Number of pages16
JournalAmerican Economic Review
Issue number4
StatePublished - Sep 1996
Externally publishedYes


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