Ratifiability of Efficient Collusive Mechanisms in Second-Price Auctions with Participation Costs
AbstractWe investigate whether efficient collusive bidding mechanisms are affected by potential information leakage from bidders' decisions to participate in them within the independent private values setting. We apply the concept of ratifiability introduced by Cramton and Palfrey (1995) and show that when the seller uses a second-price auction with participation costs, the standard efficient cartel mechanisms such as preauction knockouts analyzed in the literature will not be ratified by cartel members. A high-value bidder benefits from vetoing the cartel mechanism since doing so sends a credible signal that she has high value, which in turn discourages other bidders from bidding in the seller's auction.
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Date of creation: 30 Apr 2004
Date of revision: 09 Jun 2006
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Auctions; collusion; ratifiability;
Other versions of this item:
- Tan, Guofu & Yilankaya, Okan, 2007. "Ratifiability of efficient collusive mechanisms in second-price auctions with participation costs," Games and Economic Behavior, Elsevier, vol. 59(2), pages 383-396, May.
- Guofu Tan & Okan Yilankaya, 2005. "Ratifiability of Efficient Collusive Mechanisms in Second-Price Auctions with Participation Costs," IEPR Working Papers 05.15, Institute of Economic Policy Research (IEPR).
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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