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Fighting collusion in auctions: An experimental investigation

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  • Hu, Audrey
  • Offerman, Theo
  • Onderstal, Sander

Abstract

The danger of collusion presents a serious challenge for auctioneers. In this paper, we compare the collusive properties of two standard auctions, the English auction and the first-price sealed-bid auction, and a lesser-known format, the Amsterdam (second-price) auction. In the Amsterdam auction, the highest losing bidder earns a premium for stirring up the price. We study two settings: in one, all bidders can collude, and in another, only a subset is eligible. The experiments show that the Amsterdam auction triggers less collusion than the standard auctions. We compare experimental results to theoretical predictions, and provide an explanation where they differ.

Suggested Citation

  • Hu, Audrey & Offerman, Theo & Onderstal, Sander, 2011. "Fighting collusion in auctions: An experimental investigation," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 84-96, January.
  • Handle: RePEc:eee:indorg:v:29:y:2011:i:1:p:84-96
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jeroen Hinloopen & Sander Onderstal, 2010. "Collusion and the Choice of Auction: An Experimental Study," Tinbergen Institute Discussion Papers 10-120/1, Tinbergen Institute, revised 28 Mar 2013.
    2. Aniol Llorente-Saguer & Ro�i Zultan, 2014. "Auction Mechanisms and Bidder Collusion: Bribes, Signals and Selection," Working Papers 734, Queen Mary University of London, School of Economics and Finance.
    3. Brunner, Christoph & Hu, Audrey & Oechssler, Jörg, 2014. "Premium auctions and risk preferences: An experimental study," Games and Economic Behavior, Elsevier, vol. 87(C), pages 467-484.
    4. Gomez-Martinez, Francisco, 2017. "Partial Cartels and Mergers with Heterogenous Firms: Experimental Evidence," EconStor Preprints 169380, ZBW - German National Library of Economics.
    5. Audrey Hu & Theo Offerman & Liang Zou, 2014. "How Risk Sharing may enhance Efficiency in English Auctions," Tinbergen Institute Discussion Papers 14-015/I, Tinbergen Institute.
    6. Gomez-Martinez, Francisco, 2016. "Partial Cartels and Mergers with Heterogeneous Firms: Experimental Evidence," MPRA Paper 81132, University Library of Munich, Germany, revised 01 Jul 2017.
    7. Sven Fischer & Werner Güth & Todd R. Kaplan & Ro'i Zultan, 2014. "Auctions and Leaks: A Theoretical and Experimental Investigation," Jena Economic Research Papers 2014-027, Friedrich-Schiller-University Jena.
    8. Dejan Trifunović & Bojan Ristić, 2013. "Multi-Unit Auctions In The Procurement Of Electricity," Economic Annals, Faculty of Economics, University of Belgrade, vol. 58(197), pages 47-78, April – J.
    9. Hu, Audrey & Offerman, Theo & Zou, Liang, 2011. "Premium auctions and risk preferences," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2420-2439.
    10. Hinloopen, Jeroen & Onderstal, Sander, 2014. "Going once, going twice, reported! Cartel activity and the effectiveness of antitrust policies in experimental auctions," European Economic Review, Elsevier, vol. 70(C), pages 317-336.
    11. Bartling, Björn & Netzer, Nick, 2016. "An externality-robust auction: Theory and experimental evidence," Games and Economic Behavior, Elsevier, vol. 97(C), pages 186-204.
    12. repec:eee:eecrev:v:95:y:2017:i:c:p:84-102 is not listed on IDEAS
    13. repec:eee:gamebe:v:107:y:2018:i:c:p:93-108 is not listed on IDEAS
    14. Aniol Llorente-Saguer & Ro�i Zultan, 2014. "Auction Mechanisms and Bidder Collusion: Bribes, Signals and Selection," Working Papers 734, Queen Mary University of London, School of Economics and Finance.

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