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Collusion in Multiple Object Simultaneous Auctions: Theory and Experiments

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Author Info
Kwasnica, Anthony M.
Abstract

The choice of strategies by bidders who are allowed to communicate in auctions is studied. Using the tools of mechanism design, the possible outcomes of communication between bidders participating in a series of simultaneous first-price auctions are investigated. A variety of mechanisms are incentive compatible when side payments are not allowed. When attention is restricted to mechanisms that rely only on bidders' ordinal ranking of markets, incentive compatibility ischaracterized and the ranking mechanism of Pesendorfer (1996) is interim incentive efficient. Laboratory experiments were completed to investigate the existence, stability, and effect on bidder and seller surplus of cooperative agreements in multiple object simultaneous first-price auctions. Collusive agreements stable in the laboratory. The choices of the experimental subjects often closely match the choices predicted by the ranking and serial dictator mechanisms presented earlier. However, a few notable exceptions raise interesting prospects for the theoretical development of models of cooperative behavior.

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Paper provided by California Institute of Technology, Division of the Humanities and Social Sciences in its series Working Papers with number 1010.

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Length: 58 pages
Date of creation: Mar 1998
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Publication status: Published:
Handle: RePEc:clt:sswopa:1010

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References listed on IDEAS
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.:
  1. Isaac, R. Mark & McCue, Kenneth F. & Plott, Charles R., . "Public Goods Provision in an Experimental Environment," Working Papers 428, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
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  2. Graham, Daniel A & Marshall, Robert C, 1987. "Collusive Bidder Behavior at Single-Object Second-Price and English Auctions," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1217-39, December. [Downloadable!] (restricted)
  3. Hendricks, Kenneth & Porter, Robert H, 1988. "An Empirical Study of an Auction with Asymmetric Information," American Economic Review, American Economic Association, vol. 78(5), pages 865-83, December. [Downloadable!] (restricted)
  4. Satterthwaite, Mark A & Sonnenschein, Hugo, 1981. "Strategy-Proof Allocation Mechanisms at Differentiable Points," Review of Economic Studies, Blackwell Publishing, vol. 48(4), pages 587-97, October. [Downloadable!] (restricted)
  5. Isaac, R Mark & Walker, James M, 1988. "Communication and Free-Riding Behavior: The Voluntary Contribution Mechanism," Economic Inquiry, Oxford University Press, vol. 26(4), pages 585-608, October.
  6. Guth, Werner & Peleg, Bezalel, 1996. "On ring formation in auctions," Mathematical Social Sciences, Elsevier, vol. 32(1), pages 1-37, August. [Downloadable!] (restricted)
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  7. Isaac, R. Mark & Ramey, Valerie & Williams, Arlington W., 1984. "The effects of market organization on conspiracies in restraint of trade," Journal of Economic Behavior & Organization, Elsevier, vol. 5(2), pages 191-222, June. [Downloadable!] (restricted)
  8. Maskin, Eric & Riley, John, 2000. "Equilibrium in Sealed High Bid Auctions," Review of Economic Studies, Blackwell Publishing, vol. 67(3), pages 439-54, July.
  9. Laffont, Jean-Jacques & Martimort, David, 1998. "Mechanism Design with Collusion and Correlation," IDEI Working Papers 81, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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  10. Gibbard, Allan, 1973. "Manipulation of Voting Schemes: A General Result," Econometrica, Econometric Society, vol. 41(4), pages 587-601, July. [Downloadable!] (restricted)
  11. John O. Ledyard & Thomas R. Palfrey, 1994. "Voting and Lottery Drafts as Efficient Public Goods Mechanisms," Game Theory and Information 9405003, EconWPA, revised 22 May 1994. [Downloadable!]
  12. Isaac, R. Mark & Walker, James M., 1985. "Information and conspiracy in sealed bid auctions," Journal of Economic Behavior & Organization, Elsevier, vol. 6(2), pages 139-159, June. [Downloadable!] (restricted)
  13. Ledyard, John O & Palfrey, Thomas R, 1994. "Voting and Lottery Drafts as Efficient Public Goods Mechanisms," Review of Economic Studies, Blackwell Publishing, vol. 61(2), pages 327-55, April. [Downloadable!] (restricted)
  14. Dasgupta, Partha S & Hammond, Peter J & Maskin, Eric S, 1979. "The Implementation of Social Choice Rules: Some General Results on Incentive Compatibility," Review of Economic Studies, Blackwell Publishing, vol. 46(2), pages 185-216, April. [Downloadable!] (restricted)
  15. Pesendorfer, Martin, 2000. "A Study of Collusion in First-Price Auctions," Review of Economic Studies, Blackwell Publishing, vol. 67(3), pages 381-411, July.
  16. Cox, James C & Smith, Vernon L & Walker, James M, 1988. " Theory and Individual Behavior of First-Price Auctions," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 61-99, March.
  17. Clauser, Laura & Plott, Charles R., 1992. "On the Anatomy of the Nonfacilitating Features of the Double Auction Institution in Conspiratorial Markets," Working Papers 771, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  18. Marc S. Robinson, 1985. "Collusion and the Choice of Auction," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 141-145, Spring. [Downloadable!] (restricted)
  19. McAfee, R Preston & McMillan, John, 1992. "Bidding Rings," American Economic Review, American Economic Association, vol. 82(3), pages 579-99, June. [Downloadable!] (restricted)
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    • McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  20. Holmstrom, Bengt & Myerson, Roger B, 1983. "Efficient and Durable Decision Rules with Incomplete Information," Econometrica, Econometric Society, vol. 51(6), pages 1799-819, November. [Downloadable!] (restricted)
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  21. Rochet, Jean-Charles, 1987. "A necessary and sufficient condition for rationalizability in a quasi-linear context," Journal of Mathematical Economics, Elsevier, vol. 16(2), pages 191-200, April. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Sandro Brusco & Giuseppe Lopomo, 2004. "Collusion via Signalling in Simultaneous Ascending Bid Auctions with Heterogeneous Objects, with and without Complementarities," Levine's Bibliography 122247000000000385, UCLA Department of Economics. [Downloadable!]
    Other versions:
  2. Sherstyuk Katerina, 1999. "Collision in Private Value Ascending Price Auctions," Working Papers 1063, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
    Other versions:
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