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Optimal Collusion-Proof Auctions

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  • Che, Yeon-Koo
  • Kim, Jinwoo

Abstract

We study an optimal collusion-proof auction in an environment where subsets of bidders may collude not just on their bids but also on their participation. Despite their ability to collude on participation, informational asymmetry facing the potential colluders can be exploited significantly to weaken their collusive power. The second-best auction --- i.e., the optimal auction in a collusion-free environment --- can be made collusion-proof, if at least one bidder is not collusive, or there are multiple bidding cartels, or the second-best outcome involves a nontrivial probability of the object not being sold. In case the second-best outcome is not weak collusion-proof implementable, we characterize an optimal collusion-proof auction. This auction involves nontrivial exclusion of collusive bidders --- i.e., the object is not sold to any collusive bidder with positive probability.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6098.

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Date of creation: 06 Sep 2007
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Handle: RePEc:pra:mprapa:6098

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Citations

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Cited by:
  1. Hu, Audrey & Offerman, Theo & Onderstal, Sander, 2011. "Fighting collusion in auctions: An experimental investigation," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 84-96, January.
  2. Biran, Omer, 2011. "Mécanismes d'échange en présence d'externalités," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/7238 edited by Forges, Françoise, September.
  3. Kaplan, Todd R & Zamir, Shmuel, 2014. "Advances in Auctions," MPRA Paper 54656, University Library of Munich, Germany.
  4. Estache, Antonio & Iimi, Atsushi, 2008. "Procurement efficiency for infrastructure development and financial needs reassessed," Policy Research Working Paper Series 4662, The World Bank.
  5. Estache, Antonio & Iimi, Atsushi, 2009. "Auctions with endogenous participation and quality thresholds : evidence from ODA infrastructure procurement," Policy Research Working Paper Series 4853, The World Bank.

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