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Efficient collusion in optimal auctions

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  • Dequiedt, V.

Abstract

We study collusion in an IPV auction with binary type spaces. Collusion is organized by a third-party than can manipulate participation decisions. We characterize the optimal response of the seller to different threats of collusion among the bidders. We show that, contrary to the prevailing view that assymmetric information imposes transaction costs in side-contracting, collusion in the optimal auction is efficient when the third-party can implement monetary transfers as well as when it can implement monetary transfers and reallocations of the good. The threat of non-participation in the auction by a subset of bidders is crucial in constraining the seller's profit.

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Bibliographic Info

Paper provided by Grenoble Applied Economics Laboratory (GAEL) in its series Working Papers with number 200607.

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Date of creation: 2006
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Handle: RePEc:gbl:wpaper:200607

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Keywords: COLLUSION; THIRD PARTY; OPTIMAL AUCTION;

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  3. Armstrong, Mark & Rochet, Jean-Charles, 1999. "Multi-dimensional screening:: A user's guide," European Economic Review, Elsevier, vol. 43(4-6), pages 959-979, April.
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  5. Porter, Robert H & Zona, J Douglas, 1993. "Detection of Bid Rigging in Procurement Auctions," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 518-38, June.
  6. Laffont, Jean-Jacques & Martimort, David, 1995. "Collusion and Delegation," IDEI Working Papers 54, Institut d'Économie Industrielle (IDEI), Toulouse.
  7. Kenneth HENDRICKS & Robert H. PORTER, 1989. "Collusion in Auctions," Annales d'Economie et de Statistique, ENSAE, issue 15-16, pages 217-230.
  8. Dilip Mookherjee & Masatoshi Tsumagari, 2004. "The Organization of Supplier Networks: Effects of Delegation and Intermediation," Econometrica, Econometric Society, vol. 72(4), pages 1179-1219, 07.
  9. Cramton, Peter C. & Palfrey, Thomas R., 1990. "Ratifiable Mechanisms: Learning from Disagreement," Working Papers 731, California Institute of Technology, Division of the Humanities and Social Sciences.
  10. Gregory Pavlov, 2006. "Colluding on Participation Decisions," Boston University - Department of Economics - Working Papers Series WP2006-030, Boston University - Department of Economics.
  11. Jean-Jacques Laffont & David Martimort, 1997. "Collusion under Asymmetric Information," Econometrica, Econometric Society, vol. 65(4), pages 875-912, July.
  12. d'Aspremont, Claude & Gerard-Varet, Louis-Andre, 1979. "Incentives and incomplete information," Journal of Public Economics, Elsevier, vol. 11(1), pages 25-45, February.
  13. 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.
  14. Yeon-Koo Che & Jinwoo Kim, 2006. "Robustly Collusion-Proof Implementation," Econometrica, Econometric Society, vol. 74(4), pages 1063-1107, 07.
  15. Jean-Jacques Laffont & David Martimort, 2000. "Mechanism Design with Collusion and Correlation," Econometrica, Econometric Society, vol. 68(2), pages 309-342, March.
  16. Pesendorfer, Martin, 2000. "A Study of Collusion in First-Price Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 381-411, July.
  17. 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.
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Cited by:
  1. Che, Yeon-Koo & Kim, Jinwoo, 2007. "Optimal Collusion-Proof Auctions," MPRA Paper 6098, University Library of Munich, Germany.
  2. Martimort, David & Semenov, Aggey, 2008. "The Informational Effects of Competition and Collusion in Legislative Politics," MPRA Paper 6989, University Library of Munich, Germany.
  3. Nicolas Gruyer, 2008. "Optimal Auctions when a seller is bound to sell to collusive bidders (new version of "using lotteries ...")," Economics Working Papers 06, LEEA (air transport economics laboratory), ENAC (french national civil aviation school).
  4. Lee, Gea M., 2010. "Optimal collusion with internal contracting," Games and Economic Behavior, Elsevier, vol. 68(2), pages 646-669, March.

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