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A buyout option alleviates implicit collusion in uniform‐price auctions

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  • Toshihiro Tsuchihashi

Abstract

Demand reduction causes extremely low revenues in uniform‐price auctions, which can be interpreted as implicit collusion among bidders. We model a uniform‐price auction with a buyout option and investigate its potential for alleviating implicit collusion. We focus on the extreme case that yields a revenue of zero with no buyout option. Our main result is that the seller obtains a positive expected revenue unless the buyout price is high. Notably, a bidder will exercise a buyout option even though the bidder is risk neutral; that is, auction aversion is fully endogenous, in contradiction to the findings of previous work.

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  • Toshihiro Tsuchihashi, 2021. "A buyout option alleviates implicit collusion in uniform‐price auctions," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(5), pages 1146-1155, July.
    • Handle: RePEc:wly:mgtdec:v:42:y:2021:i:5:p:1146-1155
    DOI: 10.1002/mde.3297
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    Cited by:

    1. Shiying Chen & Zhenhuan Dong & Chunming Cao & Changjun Zheng, 2022. "Strategy and design of multi‐unit auction in grouped asymmetric setting," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3435-3453, December.
    2. Alexander Maslov, 2023. "Auctions versus posted prices in the revenue management of limited inventory," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1476-1490, April.

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