Collusive Communication Schemes in a First-Price Auction
AbstractWe study optimal bidder collusion at first-price auctions when the collusive mechanism only relies on signals about bidders’ valuations. We build on Fang and Morris (2006) when two bidders have low or high private valuation of a single object and additionally each receives a private noisy signal from an incentiveless center about the opponent’s valuation. We derive the unique symmetric equilibrium of the first price auction for any symmetric, possibly correlated, distribution of signals, when these can only take two values. Next, we find the distribution of 2-valued signals, which maximizes the joint payoffs of bidders. We prove that allowing signals to take more than two values will not increase bidders’ payoffs if the signals are restricted to be public. We also investigate the case when the signals are chosen conditionally independently and identically out of n = 2 possible values. We demonstrate that bidders are strictly better off as signals can take on more and more possible values. Finally, we look at another special case of the correlated signals, namely, when these are independent of the bidders’ valuations. We show that in any symmetric 2-valued strategy correlated equilibrium, the bidders bid as if there were no signals at all and, hence, are not able to collude.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2012/11.
Length: 50 pages
Date of creation: May 2012
Date of revision:
Contact details of provider:
Postal: Aberconway Building, Colum Drive, CARDIFF, CF10 3EU
Phone: +44 (0) 29 20874417
Fax: +44 (0) 29 20874419
Web page: http://business.cardiff.ac.uk/research/academic-sections/economics/working-papers
More information through EDIRC
Bidder-optimal signal structure; Collusion; (Bayes) correlated equilibrium; First price auction; Public and private signals;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-15 (All new papers)
- NEP-CTA-2012-05-15 (Contract Theory & Applications)
- NEP-MIC-2012-05-15 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Vasiliki Skreta, 2007.
"On the Informed Seller Problem: Optimal Information Disclosure,"
122247000000001789, UCLA Department of Economics.
- Vasiliki Skreta, 2011. "On the informed seller problem: optimal information disclosure," Review of Economic Design, Springer, Springer, vol. 15(1), pages 1-36, March.
- Vasiliki Skreta, 2007. "On the Informed Seller Problem: Optimal Information Disclosure," Levine's Bibliography 843644000000000222, UCLA Department of Economics.
- Vasiliki Skreta, 2008. "On the Informed Seller Problem: Optimal Information Disclosure," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 08-10, New York University, Leonard N. Stern School of Business, Department of Economics.
- McAfee, R Preston & McMillan, John, 1992.
American Economic Review, American Economic Association,
American Economic Association, vol. 82(3), pages 579-99, June.
- McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 726, California Institute of Technology, Division of the Humanities and Social Sciences.
- Kfir Eliaz & Roberto Serrano, 2014. "Sending information to interactive receivers playing a generalized prisoners’ dilemma," International Journal of Game Theory, Springer, Springer, vol. 43(2), pages 245-267, May.
- Dirk Bergemann & Benjamin A. Brooks & Stephen Morris, 2014.
"Extremal Information Structures in the First Price Auction,"
Levine's Working Paper Archive
786969000000000898, David K. Levine.
- Dirk Bergemann & Benjamin Brooks & Stephen Morris, 2013. "Extremal Information Structures in the First Price Auction," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1926, Cowles Foundation for Research in Economics, Yale University.
- Gregory Pavlov, 2013. "Correlated Equilibria and Communication Equilibria in All-pay Auctions," UWO Department of Economics Working Papers, University of Western Ontario, Department of Economics 20132, University of Western Ontario, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bruce Webb).
If references are entirely missing, you can add them using this form.