Nonratifiability of the Cartel Mechanism in First-Price Sealed-Bid Auction with Participation Costs
AbstractMcAfee and McMillan (1992) investigate the coordinated biding strategies in a strong cartel, in which the cartel members can exclude new entrants and can make transfer payments, and show that the strong cartel mechanism is incentive-compatible and efficient. In this paper however, we show the strong cartel mechanism is no longer ratifiable in the presence of participation cost, in which case the bidder with the highest value in the cartel would have incentive to veto for the collusive mechanism. This behavior could make the maximum benefit for the winning bidder.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 41202.
Date of creation: Aug 2009
Date of revision: Oct 2010
Nonratifiability; Cartel Mechanism; First-Price Sealed-Bid Auction;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
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.:
- Kaplan, Todd & Sela, Aner, 2003. "Auctions with Private Entry Costs," CEPR Discussion Papers 4080, C.E.P.R. Discussion Papers.
- Engelbrecht-Wiggans, Richard, 2001. "The effect of entry and information costs on oral versus sealed-bid auctions," Economics Letters, Elsevier, vol. 70(2), pages 195-202, February.
- Peter Cramton & Thomas R. Palfrey, 1991.
"Cartel Enforcement with Uncertainty About Costs,"
Papers of Peter Cramton
90ier, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
- Todd Kaplan & Shmuel Zamir, 2012. "Asymmetric first-price auctions with uniform distributions: analytic solutions to the general case," Economic Theory, Springer, vol. 50(2), pages 269-302, June.
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