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Core-stable Rings in Auctions with Independent Private Values

  • Omer Biran
  • Francoise Forges

We propose a semi-cooperative game theoretic approach to check whether a given coalition is stable in a Bayesian game with independent private values. The ex ante expected utilities of coalitions, at an incentive compatible (noncooperative) coalitional equilibrium, describe a (cooperative) partition form game. A coalition is core-stable if the core of a suitable characteristic function, derived from the partition form game, is not empty. As an application, we study collusion in auctions in which the bidders’ final utility possibly depends on the winner’s identity. We show that such direct externalities offer a possible explanation for cartels’ structures (not) observed in practice.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3067.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3067
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  1. Lebrun, Bernard, 1999. "First Price Auctions in the Asymmetric N Bidder Case," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(1), pages 125-42, February.
  2. Rajiv Vohra, 1997. "Incomplete Information, Incentive Compatibility and the Core," Working Papers 97-11, Brown University, Department of Economics.
  3. Jehiel, Philippe & Benny Moldovanu, 1994. "Strategic Non-Participation," Discussion Paper Serie B 287, University of Bonn, Germany.
  4. d'Aspremont, C. & Gerard-Varet, L. -A., 1982. "Bayesian incentive compatible beliefs," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 83-103, June.
  5. 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.
  6. Marshall, Robert C. & Marx, Leslie M., 2007. "Bidder collusion," Journal of Economic Theory, Elsevier, vol. 133(1), pages 374-402, March.
  7. FORGES, Françoise & MINELLI, Enrico & VOHRA, Rajiv, 2001. "Incentives and the core of an exchange economy: a survey," CORE Discussion Papers 2001043, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Waehrer, Keith, 1999. "Asymmetric private values auctions with application to joint bidding and mergers," International Journal of Industrial Organization, Elsevier, vol. 17(3), pages 437-452, April.
  9. Patrick Bajari, 2001. "Comparing competition and collusion: a numerical approach," Economic Theory, Springer, vol. 18(1), pages 187-205.
  10. Omer Biran, 2010. "Strategic Collusion in Auctions with Externalities," Working Papers hal-00505477, HAL.
  11. FORGES, Françoise & MINELLI, Enrico, . "A note on the incentive compatible core," CORE Discussion Papers RP -1523, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Forges, Françoise & Mertens, Jean-François & Vohra, Rajiv, 2002. "The ex ante incentive compatible core in the absence of wealth effects," Economics Papers from University Paris Dauphine 123456789/5454, Paris Dauphine University.
  13. Pesendorfer, Martin, 2000. "A Study of Collusion in First-Price Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 381-411, July.
  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 1217-39, December.
  15. Riham Barbar & Françoise Forges, 2007. "Collusion dans les enchères. Quelques apports des jeux coopératifs," Revue économique, Presses de Sciences-Po, vol. 58(5), pages 965-984.
  16. McAfee, R Preston & McMillan, John, 1992. "Bidding Rings," American Economic Review, American Economic Association, vol. 82(3), pages 579-99, June.
    • McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
  17. Ray, D. & Vohra, R., 1993. "Equilibrium Binding Agreements," Papers 21, Boston University - Department of Economics.
  18. Roger Myerson, 2004. "Virtual utility and the core for games with incomplete information," Econometric Society 2004 North American Summer Meetings 659, Econometric Society.
  19. Hafalir, Isa E., 2007. "Efficiency in coalition games with externalities," Games and Economic Behavior, Elsevier, vol. 61(2), pages 242-258, November.
  20. Ray, Debraj, 2007. "A Game-Theoretic Perspective on Coalition Formation," OUP Catalogue, Oxford University Press, number 9780199207954, March.
  21. Porter, Robert H & Zona, J Douglas, 1993. "Detection of Bid Rigging in Procurement Auctions," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 518-38, June.
  22. Bernard Caillaud & Philippe Jehiel, 1998. "Collusion in Auctions with Externalities," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 680-702, Winter.
  23. Marshall Robert C. & Meurer Michael J. & Richard Jean-Francois & Stromquist Walter, 1994. "Numerical Analysis of Asymmetric First Price Auctions," Games and Economic Behavior, Elsevier, vol. 7(2), pages 193-220, September.
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