Bribing in second-price auctions
AbstractAn IPV 2-bidder second-price auction is preceded by two rounds of bribing: prior to the auction each bidder can try to bribe his rival to depart from the auction, so that he (the briber) will become the sole participant and obtain the good for the reserve price. Bribes are offered sequentially according to an exogenously given order - there is a first mover and a second mover. I characterize the unique efficient collusive equilibrium in monotonic strategies; in it, the second mover extracts the entire collusive gain. This equilibrium remains an equilibrium even when valuations are interdependent, and if they are separable then the full surplus extraction result continues to hold. Additionally, a family of pooling equilibria is studied, in which all the types of the first mover offer the same bribe.
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Bibliographic InfoPaper provided by University of Haifa, Department of Economics in its series Working Papers with number WP2011/7.
Date of creation:
Date of revision: 06 Oct 2011
Second-price auctions; collusion; bribing; signaling; surplus extraction;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-15 (All new papers)
- NEP-CTA-2011-10-15 (Contract Theory & Applications)
- NEP-GTH-2011-10-15 (Game Theory)
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