Efficient collusion in optimal auctions
AbstractWe 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 InfoPaper provided by Grenoble Applied Economics Laboratory (GAEL) in its series Working Papers with number 200607.
Date of creation: 2006
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COLLUSION; THIRD PARTY; OPTIMAL AUCTION;
Other versions of this item:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-11 (All new papers)
- NEP-COM-2006-09-11 (Industrial Competition)
- NEP-GTH-2006-09-11 (Game Theory)
- NEP-MIC-2006-09-11 (Microeconomics)
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