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Auctions with shill bidding

Author

Listed:
  • Indranil Chakraborty
  • Georgia Kosmopoulou

Abstract

Shill bidding has increased substantially in recent years since the technology employed to conduct on-line auctions enables many sellers to disguise their identities and bid. Although their intent is to gain by misleading the bidders on the value of the object, we show that in a common value auction sellers are worse off shill bidding. In fact, any out-of-auction mechanism that makes it difficult for them to shill bid increases their revenues. In addition, shill bidding reduces the surplus of the bidders and the surplus from trade. It is only the auctioneer who could gain from this activity and in that sense he may not have an incentive from within the auction to discourage shill bidding. Copyright Springer-Verlag Berlin/Heidelberg 2004

Suggested Citation

  • Indranil Chakraborty & Georgia Kosmopoulou, 2004. "Auctions with shill bidding," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(2), pages 271-287, August.
    • Handle: RePEc:spr:joecth:v:24:y:2004:i:2:p:271-287
    DOI: 10.1007/s00199-003-0423-y
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