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Efficient collusion in optimal auctions

  • Dequiedt, Vianney

We study collusion in an IPV auction with binary type spaces. Collusion is organized by a third-party than can manipulate participation decisions. We characterize the optimal response of the seller to different threats of collusion among the bidders. We show that, contrary to the prevailing view that assymmetric information imposes transaction costs in side-contracting, collusion in the optimal auction is efficient when the third-party can implement monetary transfers as well as when it can implement monetary transfers and reallocations of the good. The threat of non-participation in the auction by a subset of bidders is crucial in constraining the seller's profit.

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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 136 (2007)
Issue (Month): 1 (September)
Pages: 302-323

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Handle: RePEc:eee:jetheo:v:136:y:2007:i:1:p:302-323
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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  1. Laffont, J.J. & Martimort, D., 1995. "Collusion and Delegation," Papers 95.397, Toulouse - GREMAQ.
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  4. Marshall, R.C. & Richard J.F., 1995. "Bider Collusion at Forest Service Timber Sales," Papers 7-95-3, Pennsylvania State - Department of Economics.
  5. d'Aspremont, Claude & Gerard-Varet, Louis-Andre, 1979. "Incentives and incomplete information," Journal of Public Economics, Elsevier, vol. 11(1), pages 25-45, February.
  6. Doh-Shin Jeon & Domenico Menicucci, 2005. "Optimal Second-Degree Price Discrimination and Arbitrage: On the Role of Asymmetric Information Among Buyers," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 337-360, Summer.
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  8. Jean-Jacques Laffont & David Martimort, 1997. "Collusion under Asymmetric Information," Econometrica, Econometric Society, vol. 65(4), pages 875-912, July.
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  10. Gregory Pavlov, 2006. "Colluding on Participation Decisions," Boston University - Department of Economics - Working Papers Series WP2006-030, Boston University - Department of Economics.
  11. Pesendorfer, Martin, 2000. "A Study of Collusion in First-Price Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 381-411, July.
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  13. 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 1217-39, December.
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