The Effect of Collusion on Efficiency in Experimental Auctions
نویسندگان
چکیده
This paper examines the effect of collusion on allocative efficiency in a second-price sealed-bid auction, in which bidders’ valuations have private and common value components. We present a theoretical model which shows that explicit collusion improves average efficiency. Furthermore, a reduction in common value signal variance increases the efficiency of allocations when a cartel is present. We test for the presence of these patterns in a laboratory experiment. Subjects can choose whether to compete or to form a cartel. Colluding bidders can communicate and make side payments using a knockout auction. Our results show that a large majority of bidders join a cartel, collusion has a negative impact on efficiency, and a reduction in common value signal variance increases efficiency under a cartel, as well as in a competitive setting. JEL Codes: D44, D82, L41, C92
منابع مشابه
How to Eliminate Collusion in Tenders and Auctions, using Game Theory (Determination of Ceiling and Floor Prices)
Governments and firms in accordance to their duties, obliged to inevitably contracts with Individuals and legal entities, especially in auction and tender process. Since, the law of conducting tenders and auctions is lacking efficiency and has major objection, therefore, this has led to the dissemination and development of areas of corruption in these contracts (through collusion). In this pape...
متن کاملPoster Summary: Towards Large-Scale Economic-Robust Spectrum Auctions
Dynamic spectrum auction is an effective solution to manage spectrum across many small networks. Yet without proper economic design, spectrum auctions can be easily manipulated by bidders, suffering huge efficiency loss. Selfish bidders can manipulate their bids, individually or in groups, to game the system and obtain outcomes that favor their own interests and hurt others. Prior solutions hav...
متن کاملDIVISION OF THE HUMANITIES AND SOCIAL SCIENCES CALIFORNIA INSTITUTE OF TECHNOLOGY PASADENA, CALIFORNIA 91125 Tacit Collusion in Auctions and Conditions for Its Facilitation and Prevention: Equilibrium Selection in Laboratory Experimental Markets
Tacit Collusion in Auctions and Conditions for Its Facilitation and Prevention: Equilibrium Selection in Laboratory Experimental Markets Jin Li Massachusetts Institute of Technology Charles R. Plott California Institute of Technology The paper studies bidder behavior in simultaneous, continuous, ascending price auctions. The purpose is to create (possibly extreme) conditions under which tacit c...
متن کاملCollusion in private value ascending price auctions
We investigate the effects of bid improvement rules and bidder value asymmetry on bidder collusion in experimental ascending price auctions without communication. We find that the strict bid improvement rule and private values are not always sufficient to break collusion among well-motivated bidders. Collusion still occurs as long as bidder gains from collusion are high. JEL classification code...
متن کاملPreventing Collusion between Firms in Auctions
Collusion among bidders in auctions is a serious concern for those interested in designing allocation procedures to allocate public assets whether the goal of the process is efficiency or revenue maximization. In either case, bidders acting collusively can seriously impair an auctioneer’s ability to accomplish their goal. There have been a wide variety of examples of collusion discussed in the ...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
عنوان ژورنال:
دوره شماره
صفحات -
تاریخ انتشار 2017