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Misbehavior in Common Value Auctions: Bidding Rings and Shills

Author

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  • Dan Levin
  • James Peck

Abstract

We characterize the optimal misbehavior by bidding rings or an auctioneer in the ascending English auction with common values. We also show, in an extended game, that in equilibrium potential members join and truthfully reveal their signals. Under a separability assumption, behavior does not change if nonring bidders are informed about the ring's existence. In general, misbehavior in dynamic settings is more profitable than in outcome-equivalent static settings. However, under a stronger separability assumption, the ring can do no better in the dynamic English format than in the outcome-equivalent, static Sophi format.

Suggested Citation

  • Dan Levin & James Peck, 2023. "Misbehavior in Common Value Auctions: Bidding Rings and Shills," American Economic Journal: Microeconomics, American Economic Association, vol. 15(1), pages 171-200, February.
    • Handle: RePEc:aea:aejmic:v:15:y:2023:i:1:p:171-200
    DOI: 10.1257/mic.20200447
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    Cited by:

    1. SHINOZAKI, Hiroki, 2024. "Shill-proof rules in object allocation problems with money," Discussion paper series HIAS-E-137, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.

    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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