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Collusion in Auctions with Externalities

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Author Info

  • Bernard Caillaud
  • Philippe Jehiel

Abstract

In standard auctions, collusion among buyers eliminates bidding competition despite informational asymmetries. Collusion can, however, be imperfect when the situation involves "externalities" among buyers, that is, when a buyer is worse off if one rival wins the good rather than if nobody gets it. For intermediate values of the externality and under various objective functions, the seller finds it optimal to design an auction that leads, in equilibrium, to a collusive outcome that is ex post inefficient for the group of buyers; an ex ante incentive-efficient collusion mechanism for the buyers is characterized in this situation.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 29 (1998)
Issue (Month): 4 (Winter)
Pages: 680-702

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Handle: RePEc:rje:randje:v:29:y:1998:i:winter:p:680-702

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Cited by:
  1. Biran, Omer & Forges, Françoise, 2011. "Core-stable rings in auctions with independent private values," Games and Economic Behavior, Elsevier, vol. 73(1), pages 52-64, September.
  2. Biran, Omer, 2011. "Mécanismes d'échange en présence d'externalités," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/7238 edited by Forges, Françoise.
  3. Ettinger, David, 2008. "Privatisation des sociétés d'autoroute et marché aval," Economics Papers from University Paris Dauphine 123456789/5432, Paris Dauphine University.
  4. 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.
  5. Sumit Joshi & Poorvi Vora, 2013. "Weak and strong multimarket bidding rings," Economic Theory, Springer, vol. 53(3), pages 657-696, August.
  6. Peter Cramton & Andrzej Skrzypacz & Robert Wilson, 2007. "Revenues in the 700 MHz Spectrum Auction," Papers of Peter Cramton 07rev700, University of Maryland, Department of Economics - Peter Cramton, revised 2007.
  7. Celik, Gorkem & Peters, Michael, 2011. "Reciprocal Relationships and Mechanism Design," Microeconomics.ca working papers gorkem_celik-2011-19, Vancouver School of Economics, revised 01 Aug 2011.
  8. Celik, Gorkem, 2004. "Mechanism Design with Collusive Supervision," Microeconomics.ca working papers celik-04-09-13-05-42-19, Vancouver School of Economics, revised 06 Aug 2008.
  9. Ariane Lambert Mogiliansky & Grigory Kosenok, 2006. "Public Markets Tailored for the Cartel- Favoritism in Procurement Auctions," Working Papers w0074, Center for Economic and Financial Research (CEFIR).
  10. Celik, Gorkem, 2004. "Counter Marginalization of Information Rents under Collusion," Microeconomics.ca working papers celik-04-01-23-02-48-07, Vancouver School of Economics, revised 27 Jan 2008.

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