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Inefficiency of Collusion at English Auctions

Author

Listed:
  • Lopomo Giuseppe

    () (Duke University)

  • Marshall Robert C.

    () (Penn State University)

  • Marx Leslie M

    () (Duke University)

Abstract

In its attempts to deter and prosecute big rigging, U.S. antitrust authorities have focused on sealed-bid procurements, rather than on ascending-bid auctions. One possible justification for this focus is the idea, supported by the existing theoretical literature, that collusion creates inefficiency at sealed-bid auctions, but not at ascending-bid auctions. We show when there is no pre-auction communication and the collusive mechanism satisfies ex-post budget balance, collusion does affect efficiency. In particular, any collusive mechanism that increases cartel members' expected payoffs relative to non-cooperative play results in inefficiency either in the allocation among cartel members or in the allocation between cartel and non-cartel bidders, or both.

Suggested Citation

  • Lopomo Giuseppe & Marshall Robert C. & Marx Leslie M, 2005. "Inefficiency of Collusion at English Auctions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 5(1), pages 1-28, June.
  • Handle: RePEc:bpj:bejtec:v:contributions.5:y:2005:i:1:n:4
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    References listed on IDEAS

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    Cited by:

    1. Forges, Françoise & Orzach, Ram, 2011. "Core-stable rings in second price auctions with common values," Journal of Mathematical Economics, Elsevier, pages 760-767.
    2. Che, Yeon-Koo & Kim, Jinwoo, 2009. "Optimal collusion-proof auctions," Journal of Economic Theory, Elsevier, vol. 144(2), pages 565-603, March.
    3. Gregory Pavlov, 2013. "Correlated Equilibria and Communication Equilibria in All-pay Auctions," UWO Department of Economics Working Papers 20132, University of Western Ontario, Department of Economics.
    4. Giuseppe Lopomo & Leslie M. Marx & David McAdams & Brian Murray, 2011. "Carbon Allowance Auction Design: An Assessment of Options for the United States," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, pages 25-43.
    5. Rodney J. Garratt & Thomas Trˆger & Charles Z. Zheng, 2009. "Collusion via Resale," Econometrica, Econometric Society, vol. 77(4), pages 1095-1136, July.
    6. David McAdams & Giuseppe Lopomo & Leslie Marx & Brian Murray, "undated". "Carbon Allowance Auction Design: An Assessment of Options for the U.S," Working Papers 10-64, Duke University, Department of Economics.
    7. Giuseppe Lopomo & Leslie Marx & Peng Sun, 2011. "Bidder collusion at first-price auctions," Review of Economic Design, Springer;Society for Economic Design, vol. 15(3), pages 177-211, September.
    8. repec:dau:papers:123456789/7891 is not listed on IDEAS

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