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Tacit Collusion in Repeated Auctions

Author

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  • Andreas Blume
  • Paul Heidhues

Abstract

We study tacit collusion in repeated auctions in which bidders can only observe pastwinners and not their bids. We adopt a stringent interpretation of tacit collusion ascollusion without communication about strategies that we model as a symmetryrestriction on repeated game strategies: Strategies cannot discriminate among initiallynameless bidders until they have become named through winning an auction. We obtainthree classes of results: (1) Completely refraining from using names, i.e. strengtheningthe symmetry constraint, rules out collusion altogether, and even if naming is permitted,as per our definition of tacit collusion, the lack of communication limits collusivestrategies and payoffs among impatient bidders. (2) If communication is allowed, thereare sustained improvements over bid rotation and competitive bidding among patientbidders. (3) These gains extend to tacit collusion among patient bidders. However,whether tacit or not, collusion need not be efficient. ZUSAMMENFASSUNG - (Stillschweigende Kollusion in wiederholten Auktionen) Der Beitrag untersucht die Möglichkeiten von "tacit collusion" (stillschweigender Kollusion) in wiederholten Auktionsspielen in welchen nur die vergangenen Gewinner nicht aber deren Gebote bekannt sind. Dabei wird "tacit collusion" als kollusives Verhalten ohne Absprachen zwischen den Bietern interpretiert. In dem Artikel werden insbesondere auch vor dem Spiel getroffene Absprachen über Strategien ausgeschlossen. Das Fehlen solcher Absprachen wird durch Symmetrierestriktionen modelliert: Strategien können solange nicht zwischen anfangs "namenlosen" Bietern unterscheiden, bis diese sich durch das Gewinnen einer Auktion von den anderen Bietern differenzieren. Es werden drei Arten von Ergebnissen hergeleitet: (1) Stärkt man die Symmetrierestriktionen und verlangt symmetrisches Verhalten in jeder Periode, so kann keine Kollusion auftreten. Aber auch weniger starke Symmetrierestriktionen, die prinzipiell eine endogene Rollenverteilung ermöglichen, schränken die möglichen Kollusionsgewinne bei ungeduldigen Bietern ein. (2) Erlaubt man vor dem Spiel getroffene Absprachen über die Strategiewahl, so können hinreichend geduldige Bieter unbegrenzt höhere Gewinne erhalten als die Gewinne bei wiederholtem Konkurrenzverhalten oder bei einer einfachen Bieterrotation. (3) Dies gilt auch für Kollusion ohne Absprachen falls die Bieter hinreichend geduldig sind. Jedoch, ob mit oder ohne a-priori Absprachen, effiziente Kollusion kann selbst bei extrem geduldigen Bietern unmöglich sein.

Suggested Citation

  • Andreas Blume & Paul Heidhues, 2001. "Tacit Collusion in Repeated Auctions," CIG Working Papers FS IV 01-23, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  • Handle: RePEc:wzb:wzebiv:fsiv01-23
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    Cited by:

    1. Nicolas Gruyer, 2005. "Using lotteries in auctions when buyers collude," Economics Working Papers 02, LEEA (air transport economics laboratory), ENAC (french national civil aviation school).
    2. Leslie M. Marx & Robert C. Marshall, 2004. "Bidder Collusion," Econometric Society 2004 North American Winter Meetings 108, Econometric Society.
    3. Johannes Hörner & Julian Jamison, 2007. "Collusion with (almost) no information," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 804-822, September.

    More about this item

    Keywords

    Tacit Collusion; Auctions; Supergames; Strategic Uncertainty; Language; Attainability;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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