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Bids as a Vehicle of (Mis)Information: Collusion in English Auctions with Affiliated Values

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During an English auction, bidders' behaviour conveys information on their valuation of the prize. So whenever valuations are not independent, a bidder's strategy depends on the price at which his competitors drop out before he does. A ring of bidders can strategically manipulate the information reported through its members' bids, in order to mislead other bidders into bidding less aggressively and so allow a ring member to bid more aggressively. Collusion increases the probability that a ring bidder wins the auction and reduces the price he pays. The presence of a ring harms other bidders (as well as the seller) and reduces efficiency.

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Bibliographic Info

Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 127.

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Date of creation: 01 Oct 2004
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Publication status: Published in Journal of Economics & Management Strategy, 2011, Vol. 20(4), 1171-1196
Handle: RePEc:sef:csefwp:127

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Keywords: auctions; collusion;

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