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Bids as a Vehicle of (Mis)Information: Collusion in English Auctions with Affiliated Values

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Abstract

During an English auction, bidders' behaviour conveys information on their valuation of the prize. So whenever valuations are not independent, a bidder's strategy depends on the price at which his competitors drop out before he does. A ring of bidders can strategically manipulate the information reported through its members' bids, in order to mislead other bidders into bidding less aggressively and so allow a ring member to bid more aggressively. Collusion increases the probability that a ring bidder wins the auction and reduces the price he pays. The presence of a ring harms other bidders (as well as the seller) and reduces efficiency.

Suggested Citation

  • Marco Pagnozzi, 2004. "Bids as a Vehicle of (Mis)Information: Collusion in English Auctions with Affiliated Values," CSEF Working Papers 127, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  • Handle: RePEc:sef:csefwp:127
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    1. repec:eee:iepoli:v:40:y:2017:i:c:p:48-59 is not listed on IDEAS
    2. repec:oup:jcomle:v:3:y:2007:i:1:p:1-47. is not listed on IDEAS
    3. Paul Klemperer, 2007. "Bidding Markets," Journal of Competition Law and Economics, Oxford University Press, vol. 3(1), pages 1-47.

    More about this item

    Keywords

    auctions; collusion;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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