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

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  • Marco Pagnozzi

Abstract

In an English auction, a bidder’s strategy depends on the prices at which his competitors drop out, because these convey information on the value of the object on sale. A ring of colluding bidders can strategically manipulate the information transmitted through its members’ bids, in order to mislead other bidders into bidding less aggressively and thus allow a designated bidder to bid more aggressively. Collusion increases the probability that the ring wins the auction and reduces the price it pays. The presence of a ring harms other bidders (as well as the seller) and reduces efficiency.

Suggested Citation

  • Marco Pagnozzi, 2011. "Bids as a Vehicle of (Mis)Information: Collusion in English Auctions with Affiliated Values," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(4), pages 1171-1196, December.
    • Handle: RePEc:bla:jemstr:v:20:y:2011:i:4:p:1171-1196
    DOI: j.1530-9134.2011.00318.x
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    References listed on IDEAS

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    Cited by:

    1. Paul Klemperer, 2007. "Bidding Markets," Journal of Competition Law and Economics, Oxford University Press, vol. 3(1), pages 1-47.
    2. Ceesay, Muhammed, 2023. "Secret vs Public Rings in Common Value Auctions," EconStor Preprints 279484, ZBW - Leibniz Information Centre for Economics.
    3. Wang, Hong, 2017. "Information acquisition versus information manipulation in multi-period procurement markets," Information Economics and Policy, Elsevier, vol. 40(C), pages 48-59.
    4. Seres, Gyula, 2017. "Auction cartels and the absence of efficient communication," International Journal of Industrial Organization, Elsevier, vol. 52(C), pages 282-306.

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    More about this item

    JEL classification:

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

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