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The ‘Shill Bidding Effect’ Versus the ‘Linkage Principle’

  • Laurent Lamy

    (Crest)

The analysis of second price auctions with externalities is utterlymodied if the seller is unable to commit not to participate in themechanism. For the General Symmetric Model (Milgrom and Weber[20]) and standard auction formats, we charaterize the full set of symmetricpure strategy equilibria with shill bids from the seller (usingpossibly mixed strategy) and compare those equilibria to the optimalone with the ability to commit not to use shill bids. The benets fromthe highlighted 'Linkage Principle' are counterbalanced by the 'ShillBidding Eect' which grows with the winner's curse.

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Paper provided by Centre de Recherche en Economie et Statistique in its series Working Papers with number 2005-35.

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Length: 34
Date of creation: 2005
Date of revision:
Handle: RePEc:crs:wpaper:2005-35
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  1. Indranil Chakraborty & Georgia Kosmopoulou, 2004. "Auctions with shill bidding," Economic Theory, Springer, vol. 24(2), pages 271-287, August.
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  3. Yokoo, Makoto & Sakurai, Yuko & Matsubara, Shigeo, 2004. "The effect of false-name bids in combinatorial auctions: new fraud in internet auctions," Games and Economic Behavior, Elsevier, vol. 46(1), pages 174-188, January.
  4. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721.
  5. Tan, Guofu & Yilankaya, Okan, 2004. "Equilibria in Second Price Auctions with Participation Costs," Microeconomics.ca working papers tan-04-01-24-10-08-06, Vancouver School of Economics, revised 09 Jun 2006.
  6. Cai, Hongbin & Riley, John & Ye, Lixin, 2007. "Reserve price signaling," Journal of Economic Theory, Elsevier, vol. 135(1), pages 253-268, July.
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  9. Engelbrecht-Wiggans, Richard & Milgrom, Paul R. & Weber, Robert J., 1983. "Competitive bidding and proprietary information," Journal of Mathematical Economics, Elsevier, vol. 11(2), pages 161-169, April.
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  12. Paul Klemperer, 2000. "What Really Matters in Auction Design," Economics Series Working Papers 2000-W26, University of Oxford, Department of Economics.
  13. Jehiel, Phillipe & Moldovanu, Benny, 1997. "Auctions with Downstream Interaction among Buyers," Sonderforschungsbereich 504 Publications 97-06, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  14. Jacob K. Goeree & Theo Offerman, 2004. "Notes and Comments the Amsterdam Auction," Econometrica, Econometric Society, vol. 72(1), pages 281-294, 01.
  15. Blume, Andreas & Heidhues, Paul, 2004. "All equilibria of the Vickrey auction," Journal of Economic Theory, Elsevier, vol. 114(1), pages 170-177, January.
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  17. McAfee, R. Preston & Vincent, Daniel, 1997. "Sequentially Optimal Auctions," Games and Economic Behavior, Elsevier, vol. 18(2), pages 246-276, February.
  18. Rod Garrat & Thomas Tröger, 2005. "Speculation in Standard Auctions with Resale," Bonn Econ Discussion Papers bgse10_2005, University of Bonn, Germany.
  19. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  20. Kenneth Hendricks & Joris Pinkse & Robert H. Porter, 2001. "Empirical Implications of Equilibrium Bidding in First-Price, Symmetric, Common Value Auctions," NBER Working Papers 8294, National Bureau of Economic Research, Inc.
  21. Bikhchandani, Sushil & Riley, John G., 1991. "Equilibria in open common value auctions," Journal of Economic Theory, Elsevier, vol. 53(1), pages 101-130, February.
  22. Lizzeri, Alessandro & Persico, Nicola, 2000. "Uniqueness and Existence of Equilibrium in Auctions with a Reserve Price," Games and Economic Behavior, Elsevier, vol. 30(1), pages 83-114, January.
  23. O. Compte & A. Lambert-Mogiliansky & T. Verdier, 2005. "Corruption and Competition in Procurement Auctions," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 1-15, Spring.
  24. Caillaud, Bernard & Mezzetti, Claudio, 2004. "Equilibrium reserve prices in sequential ascending auctions," Journal of Economic Theory, Elsevier, vol. 117(1), pages 78-95, July.
  25. Horstmann, I.J. & LaCasse, C., 1995. "Secret Reserve Prices in a Bidding Model with a Re-Sale Option," Working Papers 9507e, University of Ottawa, Department of Economics.
  26. Marshall, Robert C. & Marx, Leslie M., 2007. "Bidder collusion," Journal of Economic Theory, Elsevier, vol. 133(1), pages 374-402, March.
  27. Motty Perry & Philip J. Reny, 1999. "On The Failure of the Linkage Principle in Multi-Unit Auctions," Econometrica, Econometric Society, vol. 67(4), pages 895-900, July.
  28. Graham, Daniel A. & Marshall, Robert C. & Richard, Jean-Francois, 1990. "Phantom bidding against heterogeneous bidders," Economics Letters, Elsevier, vol. 32(1), pages 13-17, January.
  29. Levin, Dan & Kagel, John H & Richard, Jean-Francois, 1996. "Revenue Effects and Information Processing in English Common Value Auctions," American Economic Review, American Economic Association, vol. 86(3), pages 442-60, June.
  30. Athey, Susan & Haile, Philip A., 2007. "Nonparametric Approaches to Auctions," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 60 Elsevier.
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