Tacit Collusion in Repeated Auctions
This paper considers the question of tacit collusion in repeated auctions with independent private values and with limited public monitoring. McAfee and McMillan show that the extent of collusion is tied to availability of transfers. Monetary transfers allow cartels to extract full surplus. A folk theorem proved by Fudenberg at al. shows that transfers of future payoffs are almost as good if players are patient and communicate before auctions. We ask how the scope of collusion is affected if players dispense with explicit communication. Collusion better than bid rotation is still feasible, but full surplus cannot be extracted. This constraint becomes less severe with more players and large cartels can become asymptotically efficient even with very limited monitoring. (This paper is a revised version of our paper "Bidding Rings in Repeated Auctions", Rochester Center for Economic Research Working Paper No. 463 (1999).)
|Date of creation:||Aug 2001|
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- Fudenberg, Drew & Levine, David I & Maskin, Eric, 1994.
"The Folk Theorem with Imperfect Public Information,"
Econometric Society, vol. 62(5), pages 997-1039, September.
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- Drew Fudenberg & David K. Levine & Eric Maskin, 1994. "The Folk Theorem with Imperfect Public Information," Levine's Working Paper Archive 2058, David K. Levine.
- Robert H. Porter & J. Douglas Zona, 1999.
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RAND Journal of Economics,
The RAND Corporation, vol. 30(2), pages 263-288, Summer.
- McAfee, R. Preston & McMillan, John., 1990.
726, California Institute of Technology, Division of the Humanities and Social Sciences.
- Martin Pesendorfer, 2000. "A Study of Collusion in First-Price Auctions," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 381-411.
- Aoyagi, Masaki, 2003. "Bid rotation and collusion in repeated auctions," Journal of Economic Theory, Elsevier, vol. 112(1), pages 79-105, September.
- Susan Athey & Kyle Bagwell, 1999.
"Optimal Collusion with Private Information,"
99-17, Massachusetts Institute of Technology (MIT), Department of Economics.
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