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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. Francoise Forges & Jean-Francois Mertens & Rajiv Vohra, 2002. "The Ex Ante Incentive Compatible Core in the Absence of Wealth Effects," Econometrica, Econometric Society, vol. 70(5), pages 1865-1892, September.
  2. Rajiv Vohra, 1997. "Incomplete Information, Incentive Compatibility and the Core," Working Papers 97-11, Brown University, Department of Economics.
  3. Hafalir, Isa E., 2007. "Efficiency in coalition games with externalities," Games and Economic Behavior, Elsevier, vol. 61(2), pages 242-258, November.
  4. 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.
  5. Myerson, Roger B., 2007. "Virtual utility and the core for games with incomplete information," Journal of Economic Theory, Elsevier, vol. 136(1), pages 260-285, September.
  6. Bernard Caillaud & Philippe Jehiel, 1998. "Collusion in Auctions with Externalities," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 680-702, Winter.
  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. 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.
  10. Marshall, Robert C. & Marx, Leslie M., 2007. "Bidder collusion," Journal of Economic Theory, Elsevier, vol. 133(1), pages 374-402, March.
  11. d'Aspremont, C. & Gerard-Varet, L. -A., 1982. "Bayesian incentive compatible beliefs," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 83-103, June.
  12. 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.
  13. Ray, Debraj, 2007. "A Game-Theoretic Perspective on Coalition Formation," OUP Catalogue, Oxford University Press, number 9780199207954.
  14. Ray, D. & Vohra, R., 1993. "Equilibrium Binding Agreements," Papers 21, Boston University - Department of Economics.
  15. repec:dau:papers:123456789/158 is not listed on IDEAS
  16. F. Forges & E. Minelli, 1999. "A note on the incentive compatible core," THEMA Working Papers 99-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  17. Philippe Jehiel & Benny Moldovanu, 1996. "Strategic Nonparticipation," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 84-98, Spring.
  18. repec:dau:papers:123456789/5452 is not listed on IDEAS
  19. Martin Pesendorfer, 2000. "A Study of Collusion in First-Price Auctions," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 381-411.
  20. 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.
  21. McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
  22. 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.
  23. repec:dau:papers:123456789/5454 is not listed on IDEAS
  24. 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.
  25. Patrick Bajari, 2001. "Comparing competition and collusion: a numerical approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 18(1), pages 187-205.
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