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Core-stable rings in auctions with independent private values

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  • Biran, Omer
  • Forges, Françoise

Abstract

We propose a semi-cooperative game theoretic approach to check whether a given coalition is stable in a Bayesian game with independent private values. The ex ante expected utilities of coalitions, at an incentive compatible (noncooperative) coalitional equilibrium, describe a (cooperative) partition form game. A coalition is core-stable if the core of a suitable characteristic function, derived from the partition form game, is not empty. As an application, we study collusion in auctions in which the bidders' final utility possibly depends on the winner's identity. We show that such direct externalities offer a possible explanation for cartels' structures (not) observed in practice.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 73 (2011)
Issue (Month): 1 (September)
Pages: 52-64

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Handle: RePEc:eee:gamebe:v:73:y:2011:i:1:p:52-64

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Web page: http://www.elsevier.com/locate/inca/622836

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Keywords: Auctions Bayesian game Collusion Core Partition function game;

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References

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  1. Roger Myerson, 2004. "Virtual utility and the core for games with incomplete information," Econometric Society 2004 North American Summer Meetings 659, Econometric Society.
  2. Ray, D. & Vohra, R., 1993. "Equilibrium Binding Agreements," Papers 21, Boston University - Department of Economics.
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  4. Forges, Françoise & Minelli, Enrico, 2001. "A note on the incentive compatible core," Economics Papers from University Paris Dauphine 123456789/5452, Paris Dauphine University.
  5. Francoise Forges & Jean-Francois Mertens & Rajiv Vohra, 2002. "The Ex Ante Incentive Compatible Core in the Absence of Wealth Effects," Econometrica, Econometric Society, vol. 70(5), pages 1865-1892, September.
  6. Porter, Robert H & Zona, J Douglas, 1993. "Detection of Bid Rigging in Procurement Auctions," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 518-38, June.
  7. McAfee, R Preston & McMillan, John, 1992. "Bidding Rings," American Economic Review, American Economic Association, vol. 82(3), pages 579-99, June.
    • McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
  8. Jehiel, Philippe & Benny Moldovanu, 1994. "Strategic Non-Participation," Discussion Paper Serie B 287, University of Bonn, Germany.
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  10. Marshall, Robert C. & Marx, Leslie M., 2007. "Bidder collusion," Journal of Economic Theory, Elsevier, vol. 133(1), pages 374-402, March.
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  12. Marshall Robert C. & Meurer Michael J. & Richard Jean-Francois & Stromquist Walter, 1994. "Numerical Analysis of Asymmetric First Price Auctions," Games and Economic Behavior, Elsevier, vol. 7(2), pages 193-220, September.
  13. Lebrun, Bernard, 1999. "First Price Auctions in the Asymmetric N Bidder Case," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(1), pages 125-42, February.
  14. Francoise Forges & Enrico Minelli & Rajiv Vohra, 2000. "Incentives and the Core of an Exchange Economy: A Survey," Working Papers 2000-22, Brown University, Department of Economics.
  15. d'ASPREMONT , C. & GERARD VARET, L.-A., . "Bayesian incentive compatible beliefs," CORE Discussion Papers RP -481, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  16. Graham, Daniel A & Marshall, Robert C, 1987. "Collusive Bidder Behavior at Single-Object Second-Price and English Auctions," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1217-39, December.
  17. Rajiv Vohra, 1997. "Incomplete Information, Incentive Compatibility and the Core," Working Papers 97-11, Brown University, Department of Economics.
  18. Omer Biran, 2010. "Strategic Collusion in Auctions with Externalities," Working Papers hal-00505477, HAL.
  19. Waehrer, Keith, 1999. "Asymmetric private values auctions with application to joint bidding and mergers," International Journal of Industrial Organization, Elsevier, vol. 17(3), pages 437-452, April.
  20. Bernard Caillaud & Philippe Jehiel, 1998. "Collusion in Auctions with Externalities," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 680-702, Winter.
  21. Hafalir, Isa E., 2007. "Efficiency in coalition games with externalities," Games and Economic Behavior, Elsevier, vol. 61(2), pages 242-258, November.
  22. Mailath, George J. & Zemsky, Peter, 1991. "Collusion in second price auctions with heterogeneous bidders," Games and Economic Behavior, Elsevier, vol. 3(4), pages 467-486, November.
  23. Patrick Bajari, 2001. "Comparing competition and collusion: a numerical approach," Economic Theory, Springer, vol. 18(1), pages 187-205.
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Citations

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Cited by:
  1. Orzach, Ram & Forges, Françoise, 2011. "Core-stable rings in second price auctions with common values," Economics Papers from University Paris Dauphine 123456789/7891, Paris Dauphine University.
  2. Forges, Françoise & Serrano, Roberto, 2013. "Cooperative Games with Incomplete Information : Some Open Problems," Economics Papers from University Paris Dauphine 123456789/8158, Paris Dauphine University.
  3. Sonja Brangewitz & Sarah Brockhoff, 2012. "Stability of Coalitional Equilibria within Repeated Tax Competition," Working Papers CIE 48, University of Paderborn, CIE Center for International Economics.
  4. Omer Biran, 2011. "Core stable bidding rings in independent private value auctions with externalities," Working Papers halshs-00608008, HAL.
  5. repec:pdn:wpaper:48 is not listed on IDEAS
  6. Sonja Brangewitz & Sarah Brockhoff, 2012. "Stability of Coalitional Equilibria within Repeated Tax Competition," Working Papers 461, Bielefeld University, Center for Mathematical Economics.
  7. Omer Biran, 2013. "Strategic collusion in auctions with externalities," Theory and Decision, Springer, vol. 75(1), pages 117-136, July.

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