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Collusion via Resale

Author

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  • Rodney J. Garratt
  • Thomas Trˆger
  • Charles Z. Zheng

Abstract

The English auction is susceptible to tacit collusion when post-auction interbidder resale is allowed. We show this by constructing equilibria where, with positive probability, one bidder wins the auction without any competition and divides the spoils by optimally reselling the good to the other bidders. These equilibria interim Pareto-dominate (among bidders) the standard value-bidding equilibrium without requiring the bidders to make any commitment on bidding behavior or postbidding spoil division. Copyright 2009 The Econometric Society.

Suggested Citation

  • Rodney J. Garratt & Thomas Trˆger & Charles Z. Zheng, 2009. "Collusion via Resale," Econometrica, Econometric Society, vol. 77(4), pages 1095-1136, July.
  • Handle: RePEc:ecm:emetrp:v:77:y:2009:i:4:p:1095-1136
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    References listed on IDEAS

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    1. Rod Garratt & Thomas Tröger, 2006. "Speculation in Standard Auctions with Resale," Econometrica, Econometric Society, vol. 74(3), pages 753-769, May.
    2. Gale, Ian L & Hausch, Donald B & Stegeman, Mark, 2000. "Sequential Procurement with Subcontracting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(4), pages 989-1020, November.
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    4. Sandro Brusco & Giuseppe Lopomo, 2002. "Collusion via Signalling in Simultaneous Ascending Bid Auctions with Heterogeneous Objects, with and without Complementarities," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 407-436.
    5. McAfee, R Preston & McMillan, John, 1992. "Bidding Rings," American Economic Review, American Economic Association, vol. 82(3), pages 579-599, June.
      • McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
    6. Paul Milgrom, 2000. "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 245-272, April.
    7. James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
    8. Haile,P.A., 1999. "Auctions with resale," Working papers 33, Wisconsin Madison - Social Systems.
    9. Charles Zheng, 2000. "An Optimal Auction When Resale Cannot Be Prohibited," Discussion Papers 1303, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    10. Isa Hafalir & Vijay Krishna, 2008. "Asymmetric Auctions with Resale," American Economic Review, American Economic Association, vol. 98(1), pages 87-112, March.
    11. Richard Engelbrecht-Wiggans & Charles M. Kahn, 2005. "Low-Revenue Equilibria in Simultaneous Ascending-Bid Auctions," Management Science, INFORMS, vol. 51(3), pages 508-518, March.
    12. Mylovanov, Tymofiy & Tröger, Thomas, 2006. "A Characterization of the Conditions for Optimal Auction with Resale," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 128, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    13. Mailath, George J. & Zemsky, Peter, 1991. "Collusion in second price auctions with heterogeneous bidders," Games and Economic Behavior, Elsevier, vol. 3(4), pages 467-486, November.
    14. Graham, Daniel A & Marshall, Robert C, 1987. "Collusive Bidder Behavior at Single-Object Second-Price and English Auctions," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1217-1239, December.
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    Citations

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    Cited by:

    1. Bernard Lebrun, 2008. "First-Price, Second-Price, and English Auctions with Resale," Working Papers 2008_06, York University, Department of Economics.
    2. Ding, Wei & Fan, Cuihong & Wolfstetter, Elmar G., 2013. "Horizontal mergers with synergies: Cash vs. profit-share auctions," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 382-391.
    3. De Frutos, María Ángeles & Espinosa Alejos, María Paz, 2012. "Resale in Auctions with Financial Constraints," DFAEII Working Papers 2012-03, University of the Basque Country - Department of Foundations of Economic Analysis II.
    4. Todd R. Kaplan & Shmuel Zamir, 2014. "Advances in Auctions," Discussion Papers 1405, Exeter University, Department of Economics.
    5. Hafalir Isa & Kurnaz Musab, "undated". "Discriminatory Auctions with Resale," GSIA Working Papers 2015-E12, Carnegie Mellon University, Tepper School of Business.
    6. Tymofiy Mylovanov & Thomas Tröger, 2009. "Optimal auction with resale—a characterization of the conditions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 40(3), pages 509-528, September.
    7. Xiaoshu Xu & Dan Levin & Lixin Ye, 2012. "Auctions with synergy and resale," International Journal of Game Theory, Springer;Game Theory Society, vol. 41(2), pages 397-426, May.
    8. Saral, Krista Jabs, 2012. "Speculation and demand reduction in English clock auctions with resale," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 416-431.
    9. repec:eee:indorg:v:55:y:2017:i:c:p:58-90 is not listed on IDEAS
    10. 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.
    11. Dallas Burtraw & Jacob Goeree & Charles A. Holt & Erica Myers & Karen Palmer & William Shobe, 2009. "Collusion in auctions for emission permits: An experimental analysis," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 28(4), pages 672-691.
    12. Kaplan, Todd R. & Zamir, Shmuel, 2015. "Advances in Auctions," Handbook of Game Theory with Economic Applications, Elsevier.
    13. Xu, Xiaoshu & Levin, Dan & Ye, Lixin, 2013. "Auctions with entry and resale," Games and Economic Behavior, Elsevier, vol. 79(C), pages 92-105.
    14. Charles Z. Zheng, 2014. "Existence of Monotone Equilibria in First-Price Auctions with Resale," University of Western Ontario, Economic Policy Research Institute Working Papers 20141, University of Western Ontario, Economic Policy Research Institute.
    15. Celik, Gorkem & Yilankaya, Okan, 2017. "Resale in second-price auctions with costly participation," International Journal of Industrial Organization, Elsevier, pages 148-174.
    16. Thomas Tröger & Tymofiy Mylovanov, 2008. "Optimal Auction Design and Irrelevance of Private Information," Bonn Econ Discussion Papers bgse21_2008, University of Bonn, Germany.
    17. Zheng, Charles Z., 2012. "Jump bidding and overconcentration in decentralized simultaneous ascending auctions," Games and Economic Behavior, Elsevier, vol. 76(2), pages 648-664.
    18. Lebrun, Bernard, 2012. "Optimality and the English and second-price auctions with resale," Games and Economic Behavior, Elsevier, vol. 75(2), pages 731-751.
    19. Filiz-Ozbay, Emel & Lopez-Vargas, Kristian & Ozbay, Erkut Y., 2015. "Multi-object auctions with resale: Theory and experiment," Games and Economic Behavior, Elsevier, vol. 89(C), pages 1-16.

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    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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