IDEAS home Printed from https://ideas.repec.org/a/oup/restud/v93y2026i1p600-628..html

The Value of Privacy in Cartels: An Analysis of the Inner Workings of a Bidding Ring

Author

Listed:
  • Kei Kawai
  • Jun Nakabayashi
  • Juan Ortner

Abstract

We study how incentive constraints can be relaxed by randomization in a repeated-game setting. Our study is motivated by the workings of a detected bidding cartel that adopted a protocol of keeping the winning bid secret from the designated losers when defection was a concern. Keeping the winning bid secret makes accurately undercutting the winning bid more difficult and makes defection less attractive as potential defectors risk not winning the auction even if they deviate. We formalize these ideas in the context of a repeated-game setting and show that a cartel can attain higher payoffs by having the pre-selected winner randomize its bid and keep it secret from other members. Calibration of the model to the bid data of the cartel suggests that randomization may increase firms’ profits by about 56%.

Suggested Citation

  • Kei Kawai & Jun Nakabayashi & Juan Ortner, 2026. "The Value of Privacy in Cartels: An Analysis of the Inner Workings of a Bidding Ring," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 93(1), pages 600-628.
    • Handle: RePEc:oup:restud:v:93:y:2026:i:1:p:600-628.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/restud/rdaf023
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:restud:v:93:y:2026:i:1:p:600-628.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/restud .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.