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Core-stable rings in auctions with independent private values

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  • Forges, Françoise
  • Biran, Omer

Abstract

We propose a semi-cooperative game theoretic approach to check whether a given coalition is stable in a Bayesian game with independent private values. The ex ante expected utilities of coalitions, at an incentive compatible (noncooperative) coalitional equilibrium, describe a (cooperative) partition form game. A coalition is core-stable if the core of a suitable characteristic function, derived from the partition form game, is not empty. As an application, we study collusion in auctions in which the bidders' final utility possibly depends on the winner's identity. We show that such direct externalities offer a possible explanation for cartels'structures (not) observed in practice.

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File URL: http://basepub.dauphine.fr/xmlui/bitstream/123456789/4100/1/Stablebiddingrings.pdf
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Bibliographic Info

Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/4100.

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Date of creation: 2011
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Publication status: Published in Games and Economic Behavior, 2011, Vol. 73, no. 1. pp. 52-64.Length: 12 pages
Handle: RePEc:dau:papers:123456789/4100

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Keywords: Core; partition function game; Collusion; Auctions; Bayesian game;

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References

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  1. Francoise Forges & Jean-Francois Mertens & Rajiv Vohra, 2002. "The Ex Ante Incentive Compatible Core in the Absence of Wealth Effects," Econometrica, Econometric Society, vol. 70(5), pages 1865-1892, September.
  2. d'ASPREMONT , C. & GERARD VARET, L.-A., . "Bayesian incentive compatible beliefs," CORE Discussion Papers RP -481, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. FORGES, Françoise & MINELLI, Enrico & VOHRA, Rajiv, 2001. "Incentives and the core of an exchange economy: a survey," CORE Discussion Papers 2001043, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Hafalir, Isa E., 2007. "Efficiency in coalition games with externalities," Games and Economic Behavior, Elsevier, vol. 61(2), pages 242-258, November.
  5. Jehiel, Philippe & Benny Moldovanu, 1994. "Strategic Non-Participation," Discussion Paper Serie B 287, University of Bonn, Germany.
  6. 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.
  7. Bernard Caillaud & Philippe Jehiel, 1998. "Collusion in Auctions with Externalities," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 680-702, Winter.
  8. F. Forges & E. Minelli, 1999. "A note on the incentive compatible core," THEMA Working Papers 99-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  9. Rajiv Vohra, 1997. "Incomplete Information, Incentive Compatibility and the Core," Working Papers 97-11, Brown University, Department of Economics.
  10. Forges, Françoise & Barbar, Riham, 2007. "Collusion dans les enchères : quelques apports des jeux coopératifs," Economics Papers from University Paris Dauphine 123456789/158, Paris Dauphine University.
  11. Lebrun, Bernard, 1999. "First Price Auctions in the Asymmetric N Bidder Case," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(1), pages 125-42, February.
  12. Robert H. Porter & J. Douglas Zona, 1992. "Detection of Bid Rigging in Procurement Auctions," NBER Working Papers 4013, National Bureau of Economic Research, Inc.
  13. McAfee, R Preston & McMillan, John, 1992. "Bidding Rings," American Economic Review, American Economic Association, vol. 82(3), pages 579-99, June.
    • McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
  14. Patrick Bajari, 2001. "Comparing competition and collusion: a numerical approach," Economic Theory, Springer, vol. 18(1), pages 187-205.
  15. Marshall, Robert C. & Marx, Leslie M., 2007. "Bidder collusion," Journal of Economic Theory, Elsevier, vol. 133(1), pages 374-402, March.
  16. Mailath, George J. & Zemsky, Peter, 1991. "Collusion in second price auctions with heterogeneous bidders," Games and Economic Behavior, Elsevier, vol. 3(4), pages 467-486, November.
  17. Waehrer, Keith, 1999. "Asymmetric private values auctions with application to joint bidding and mergers," International Journal of Industrial Organization, Elsevier, vol. 17(3), pages 437-452, April.
  18. Pesendorfer, Martin, 2000. "A Study of Collusion in First-Price Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 381-411, July.
  19. Ray, D. & Vohra, R., 1993. "Equilibrium Binding Agreements," Papers 21, Boston University - Department of Economics.
  20. Omer Biran, 2010. "Strategic Collusion in Auctions with Externalities," Working Papers hal-00505477, HAL.
  21. Ray, Debraj, 2007. "A Game-Theoretic Perspective on Coalition Formation," OUP Catalogue, Oxford University Press, number 9780199207954, October.
  22. Roger Myerson, 2004. "Virtual utility and the core for games with incomplete information," Econometric Society 2004 North American Summer Meetings 659, Econometric Society.
  23. Marshall Robert C. & Meurer Michael J. & Richard Jean-Francois & Stromquist Walter, 1994. "Numerical Analysis of Asymmetric First Price Auctions," Games and Economic Behavior, Elsevier, vol. 7(2), pages 193-220, September.
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Citations

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Cited by:
  1. Françoise Forges & Roberto Serrano, 2011. "Cooperative games with incomplete information: Some open problems," Working Papers 2011-14, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  2. Sonja Brangewitz & Sarah Brockhoff, 2012. "Stability of Coalitional Equilibria within Repeated Tax Competition," Working Papers 461, Bielefeld University, Center for Mathematical Economics.
  3. Omer Biran, 2011. "Core stable bidding rings in independent private value auctions with externalities," Working Papers halshs-00608008, HAL.
  4. repec:pdn:wpaper:48 is not listed on IDEAS
  5. Omer Biran, 2013. "Strategic collusion in auctions with externalities," Theory and Decision, Springer, vol. 75(1), pages 117-136, July.
  6. Forges, Françoise & Orzach, Ram, 2011. "Core-stable rings in second price auctions with common values," Journal of Mathematical Economics, Elsevier, vol. 47(6), pages 760-767.
  7. Sonja Brangewitz & Sarah Brockhoff, 2012. "Stability of Coalitional Equilibria within Repeated Tax Competition," Working Papers CIE 48, University of Paderborn, CIE Center for International Economics.

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