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Optimal Collusion-Proof Auctions

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  • Yeon-Koo Che

    ()
    (Department of Economics, Columbia University)

  • Jinwoo Kim

    ()
    (Yonsei University)

Abstract

We study an optimal collusion-proof auction in an environment where subsets of bidders may collude not just on their bids but also on their participation. Despite their ability to collude on participation, informational asymmetry facing the potential colluders can be exploited significantly to weaken their collusive power. The second-best auction i.e., the optimal auction in a collusion-free environment can be made collusion-proof, if at least one bidder is not collusive, or there are multiple bidding cartels, or the second-best outcome involves a nontrivial probability of the object not being sold. In case the second-best outcome is not weak collusion-proof implementable, we characterize an optimal collusion-proof auction. This auction involves nontrivial exclusion of collusive bidders i.e., the object is not sold to any collusive bidder with positive probability.

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Bibliographic Info

Paper provided by Columbia University, Department of Economics in its series Discussion Papers with number 0708-05.

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Length: 46 pages
Date of creation: 2007
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Handle: RePEc:clu:wpaper:0708-05

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Cited by:
  1. Antonio Estache & A. Iimi, 2009. "Auctions with Endogenous Participation and Quality Thresholds: Evidence from ODA Infrastructure Procurement," Working Papers ECARES 2009_006, ULB -- Universite Libre de Bruxelles.
  2. Biran, Omer, 2011. "Mécanismes d'échange en présence d'externalités," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/7238 edited by Forges, Françoise, November.
  3. Todd R. Kaplan & Shmuel Zamir, 2014. "Advances in Auctions," Discussion Paper Series dp662, The Center for the Study of Rationality, Hebrew University, Jerusalem.
  4. Antonio Estache & A. Iimi, 2008. "Procurement Efficiency for Infrastructure Development and Financial Needs Reassessed," Working Papers ECARES 2008_022, ULB -- Universite Libre de Bruxelles.
  5. Hu, Audrey & Offerman, Theo & Onderstal, Sander, 2011. "Fighting collusion in auctions: An experimental investigation," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 84-96, January.

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