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Weak and strong multimarket bidding rings

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  • Sumit Joshi
  • Poorvi Vora

Abstract

We consider bidders who are simultaneously participating in private value second-price sealed bid auctions in multiple markets. While active in each market, each bidder is associated with a unique home market in which it can potentially serve as a ring center. Pairs of bidders can establish bilateral agreements to be members of bidding rings in each others’ home markets. Rings can be weak or strong depending respectively on whether side payments are permitted or not. Weak multimarket rings have been shown to take the form of exclusive groups of completely connected bidders. We consider strong multimarket bidding rings and show that they assume a radically different architecture of dominant groups, stars, and interlinked stars. Since bidding rings are tacit, and therefore unobservable, we develop observable implications of multimarket rings that can detect the existence of collusion as well as its form (i.e., weak or strong). Copyright Springer-Verlag 2013

Suggested Citation

  • Sumit Joshi & Poorvi Vora, 2013. "Weak and strong multimarket bidding rings," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 53(3), pages 657-696, August.
  • Handle: RePEc:spr:joecth:v:53:y:2013:i:3:p:657-696
    DOI: 10.1007/s00199-012-0709-z
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    More about this item

    Keywords

    Weak rings; Strong rings; Private value auctions; Stars and interlinked stars; Dominant groups; D44; D85;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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