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Two Models of Bid-Taker Cheating in Vickrey Auctions

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  • Rothkopf, Michael H
  • Harstad, Ronald M

Abstract

Vickrey (second-price sealed-bid) auctions have attractive theoretical properties but standard first-price sealed bidding is far more common. Explanations of the rarity of Vickrey auctions rely on concern about revelation of private information and on fear of cheating. The authors present two models of bid-taker cheating: a static, game-theoretic model and a reputation-based model of repeated auctions. In the first, an honest bid-taker will not choose a Vickrey auction. In the second, a trusted bid-taker who cheats when it pays eventually destroys his or her reputation and the trust on which the use of Vickrey auctions depends. Copyright 1995 by University of Chicago Press.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 68 (1995)
Issue (Month): 2 (April)
Pages: 257-67

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Handle: RePEc:ucp:jnlbus:v:68:y:1995:i:2:p:257-67

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Web page: http://www.journals.uchicago.edu/JB/

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Cited by:
  1. Takahiro Watanabe & Takehiko Yamato, 2008. "A choice of auction format in seller cheating: a signaling game analysis," Economic Theory, Springer, vol. 36(1), pages 57-80, July.
  2. Ronald M. Harstad, 2005. "Rational Participation Revolutionizes Auction Theory," Working Papers 0518, Department of Economics, University of Missouri.
  3. Ronald M. Harstad & Aleksandar Pekec & Ilia Tsetlin, 2005. "Information Aggregation in Auctions with an Unknown Number of Bidders," Working Papers 0605, Department of Economics, University of Missouri.
  4. G. William Schwert, 1994. "Mark-Up Pricing in Mergers and Acquisitions," NBER Working Papers 4863, National Bureau of Economic Research, Inc.
  5. Ronald M Harstad, 2011. "Endogenous Competition Alters the Structure of Optimal Auctions," ISER Discussion Paper 0816, Institute of Social and Economic Research, Osaka University.
  6. David Lucking-Reiley, 2000. "Vickrey Auctions in Practice: From Nineteenth-Century Philately to Twenty-First-Century E-Commerce," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 183-192, Summer.
  7. Georgia Kosmopoulou & Dakshina G. De Silva, 2005. "The Effect of Shill Bidding upon Prices: Experimental Evidence," Experimental 0512002, EconWPA.

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