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Efficient collusion in optimal auctions

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Author Info
Dequiedt, V.

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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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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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Related research
Keywords: COLLUSION; THIRD PARTY; OPTIMAL AUCTION;

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Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

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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. 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. [Downloadable!] (restricted)
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  2. Celik, Gorkem, 2004. "Mechanism Design with Collusive Supervision," Micro Theory Working Papers celik-04-09-13-05-42-19, Microeconomics.ca Website, revised 06 Aug 2008. [Downloadable!]
    Other versions:
  3. Yeon-Koo Che & Jinwoo Kim, 2006. "Robustly Collusion-Proof Implementation," Econometrica, Econometric Society, vol. 74(4), pages 1063-1107, 07. [Downloadable!] (restricted)
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  4. Kenneth Hendricks & Robert Porter, 1989. "Collusion in Auctions," Discussion Papers 817, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  5. 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. [Downloadable!] (restricted)
  6. 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. [Downloadable!] (restricted)
  7. Gregory Pavlov, 2006. "Colluding on Participation Decisions," Boston University - Department of Economics - Working Papers Series WP2006-030, Boston University - Department of Economics. [Downloadable!]
  8. Jean-Jacques Laffont & David Martimort, 1997. "Collusion under Asymmetric Information," Econometrica, Econometric Society, vol. 65(4), pages 875-912, July.
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  9. d'Aspremont, Claude & Gerard-Varet, Louis-Andre, 1979. "Incentives and incomplete information," Journal of Public Economics, Elsevier, vol. 11(1), pages 25-45, February. [Downloadable!] (restricted)
  10. Pesendorfer, Martin, 2000. "A Study of Collusion in First-Price Auctions," Review of Economic Studies, Blackwell Publishing, vol. 67(3), pages 381-411, July.
  11. 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. [Downloadable!] (restricted)
  12. Baldwin, Laura H & Marshall, Robert C & Richard, Jean-Francois, 1997. "Bidder Collusion at Forest Service Timber Sales," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 657-99, August.
  13. 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!]
  14. Doh-Shin Jeon & Domenico Menicucci, 2005. "Optimal Second-Degree Price Discrimination and Arbitrage: On the Role of Asymmetric Information Among Buyers," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 337-360, Summer.
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  15. Cramton Peter C. & Palfrey Thomas R., 1995. "Ratifiable Mechanisms: Learning from Disagreement," Games and Economic Behavior, Elsevier, vol. 10(2), pages 255-283, August. [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. Martimort, David & Semenov, Aggey, 2008. "The Informational Effects of Competition and Collusion in Legislative Politics," MPRA Paper 6989, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  2. Che, Yeon-Koo & Kim, Jinwoo, 2007. "Optimal Collusion-Proof Auctions," MPRA Paper 6098, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  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). [Downloadable!]
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