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Efficient collusion in optimal auctions

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  • Dequiedt, V.

Abstract

We study collusion in an IPV auction with binary type spaces. Collusion is organized by a third-party than can manipulate participation decisions. We characterize the optimal response of the seller to different threats of collusion among the bidders. We show that, contrary to the prevailing view that assymmetric information imposes transaction costs in side-contracting, collusion in the optimal auction is efficient when the third-party can implement monetary transfers as well as when it can implement monetary transfers and reallocations of the good. The threat of non-participation in the auction by a subset of bidders is crucial in constraining the seller's profit.

Suggested Citation

  • Dequiedt, V., 2006. "Efficient collusion in optimal auctions," Working Papers 200607, Grenoble Applied Economics Laboratory (GAEL).
  • Handle: RePEc:gbl:wpaper:200607
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    References listed on IDEAS

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    1. Kenneth Hendricks & Robert H. Porter, 1989. "Collusion in Auctions," Annals of Economics and Statistics, GENES, pages 217-230.
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    Citations

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    Cited by:

    1. Olga Gorelkina, 2014. "Bidder Collusion and the Auction with Target Bids," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2014_10, Max Planck Institute for Research on Collective Goods.
    2. Martimort, David & Semenov, Aggey, 2008. "The informational effects of competition and collusion in legislative politics," Journal of Public Economics, Elsevier, pages 1541-1563.
    3. Lee, Gea M., 2010. "Optimal collusion with internal contracting," Games and Economic Behavior, Elsevier, pages 646-669.
    4. Martimort, David & Semenov, Aggey, 2008. "The informational effects of competition and collusion in legislative politics," Journal of Public Economics, Elsevier, pages 1541-1563.
    5. Asseyer, Andreas, 2016. "Optimal Information Disclosure and Collusion," Annual Conference 2016 (Augsburg): Demographic Change 145779, Verein für Socialpolitik / German Economic Association.
    6. Che, Yeon-Koo & Kim, Jinwoo, 2009. "Optimal collusion-proof auctions," Journal of Economic Theory, Elsevier, pages 565-603.
    7. Rachmilevitch, Shiran, 2015. "Bribing in second-price auctions," Games and Economic Behavior, Elsevier, vol. 92(C), pages 191-205.
    8. Meng, Dawen & Tian, Guoqiang, 2014. "Collusion-Proof Mechanism Design in Two-Agent Nonlinear Pricing Environments," MPRA Paper 57931, University Library of Munich, Germany.
    9. Nicolas Gruyer, 2008. "Optimal Auctions when a seller is bound to sell to collusive bidders (new version of "using lotteries ...")," Economics Working Papers 06, LEEA (air transport economics laboratory), ENAC (french national civil aviation school).
    10. repec:spr:reecde:v:21:y:2017:i:3:d:10.1007_s10058-017-0204-x is not listed on IDEAS
    11. Xiaogang Che & Tilman Klumpp, 2016. "Entry Deterrence in Dynamic Second-Price Auctions," American Economic Journal: Microeconomics, American Economic Association, pages 168-201.

    More about this item

    Keywords

    COLLUSION; THIRD PARTY; OPTIMAL AUCTION;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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