IDEAS home Printed from https://ideas.repec.org/a/bla/jindec/v57y2009i4p835-850.html
   My bibliography  Save this article

Optimal Auctions When A Seller Is Bound To Sell To Collusive Bidders

Author

Listed:
  • NICOLAS GRUYER

Abstract

I consider optimal auctions for a seller who is bound to sell a single item to one of two potential buyers, organized in a ‘well‐coordinated’ cartel. I show that, even though the seller cannot deter collusion, he can optimally accommodate it by employing a simple mechanism which imposes an inefficient allocation on the bidders unless they pay a sufficiently high amount to avoid it.

Suggested Citation

  • Nicolas Gruyer, 2009. "Optimal Auctions When A Seller Is Bound To Sell To Collusive Bidders," Journal of Industrial Economics, Wiley Blackwell, vol. 57(4), pages 835-850, December.
    • Handle: RePEc:bla:jindec:v:57:y:2009:i:4:p:835-850
    DOI: 10.1111/j.1467-6451.2009.00397.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-6451.2009.00397.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-6451.2009.00397.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Dequiedt, Vianney, 2007. "Efficient collusion in optimal auctions," Journal of Economic Theory, Elsevier, vol. 136(1), pages 302-323, September.
    2. Andreas Blume & Paul Heidhues, 2008. "Modeling Tacit Collusion in Auctions," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(1), pages 163-184, March.
    3. William S. Comanor & Mark A. Schankerman, 1976. "Identical Bids and Cartel Behavior," Bell Journal of Economics, The RAND Corporation, vol. 7(1), pages 281-286, Spring.
    4. Hay, George A & Kelley, Daniel, 1974. "An Empirical Survey of Price Fixing Conspiracies," Journal of Law and Economics, University of Chicago Press, vol. 17(1), pages 13-38, April.
    5. Yeon-Koo Che & Jinwoo Kim, 2006. "Robustly Collusion-Proof Implementation," Econometrica, Econometric Society, vol. 74(4), pages 1063-1107, July.
    6. Baldwin, Laura H & Marshall, Robert C & Richard, Jean-Francois, 1997. "Bidder Collusion at Forest Service Timber Sales," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 657-699, August.
    7. Jean-Jacques Laffont & David Martimort, 1997. "Collusion under Asymmetric Information," Econometrica, Econometric Society, vol. 65(4), pages 875-912, July.
    8. Jullien, Bruno, 2000. "Participation Constraints in Adverse Selection Models," Journal of Economic Theory, Elsevier, vol. 93(1), pages 1-47, July.
    9. Jean-Jacques Laffont & David Martimort, 2000. "Mechanism Design with Collusion and Correlation," Econometrica, Econometric Society, vol. 68(2), pages 309-342, March.
    10. Graham, Daniel A & Marshall, Robert C, 1987. "Collusive Bidder Behavior at Single-Object Second-Price and English Auctions," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1217-1239, December.
    11. Martin Pesendorfer, 2000. "A Study of Collusion in First-Price Auctions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(3), pages 381-411.
    12. Robert H. Porter & J. Douglas Zona, 1999. "Ohio School Milk Markets: An Analysis of Bidding," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 263-288, Summer.
    13. Lucia Quesada, 2005. "Collusion as an Informed Principal Problem," Game Theory and Information 0504002, University Library of Munich, Germany.
    14. Eshien Chong & Freddy Huet & Stéphane Saussier & Faye Steiner, 2006. "Public-Private Partnerships and Prices: Evidence from Water Distribution in France," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 29(1), pages 149-169, September.
    15. Lewis, Tracy R. & Sappington, David E. M., 1989. "Countervailing incentives in agency problems," Journal of Economic Theory, Elsevier, vol. 49(2), pages 294-313, December.
    16. Skrzypacz, Andrzej & Hopenhayn, Hugo, 2004. "Tacit collusion in repeated auctions," Journal of Economic Theory, Elsevier, vol. 114(1), pages 153-169, January.
    17. Owen R. Phillips & Dale J. Menkhaus & Kalyn T. Coatney, 2003. "Collusive Practices in Repeated English Auctions: Experimental Evidence on Bidding Rings," American Economic Review, American Economic Association, vol. 93(3), pages 965-979, June.
    18. Gregory Pavlov, 2006. "Colluding on Participation Decisions," Boston University - Department of Economics - Working Papers Series WP2006-030, Boston University - Department of Economics.
    19. Maggi G. & Rodriguez-Clare A., 1995. "On Countervailing Incentives," Journal of Economic Theory, Elsevier, vol. 66(1), pages 238-263, June.
    20. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    21. Aoyagi, Masaki, 2003. "Bid rotation and collusion in repeated auctions," Journal of Economic Theory, Elsevier, vol. 112(1), pages 79-105, September.
    22. Vernon A. Mund, 1960. "Identical Bid Prices," Journal of Political Economy, University of Chicago Press, vol. 68(2), pages 150-150.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pavlov Gregory, 2011. "Optimal Mechanism for Selling Two Goods," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-35, February.
    2. Jeroen Hinloopen & Sander Onderstal, 2010. "Collusion and the Choice of Auction: An Experimental Study," Tinbergen Institute Discussion Papers 10-120/1, Tinbergen Institute, revised 28 Mar 2013.
    3. Pavlov Gregory, 2011. "A Property of Solutions to Linear Monopoly Problems," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-18, February.
    4. Olga Gorelkina, 2018. "Collusion via Information Sharing and Optimal Auctions," Working Papers 20182, University of Liverpool, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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).
    2. Che, Yeon-Koo & Kim, Jinwoo, 2009. "Optimal collusion-proof auctions," Journal of Economic Theory, Elsevier, vol. 144(2), pages 565-603, March.
    3. Hu, Audrey & Offerman, Theo & Onderstal, Sander, 2011. "Fighting collusion in auctions: An experimental investigation," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 84-96, January.
    4. 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).
    5. Wang, Hong, 2017. "Information acquisition versus information manipulation in multi-period procurement markets," Information Economics and Policy, Elsevier, vol. 40(C), pages 48-59.
    6. Nicolas Gruyer, 2005. "Using lotteries in auctions when buyers collude," Working Papers hal-01021534, HAL.
    7. Celik, Gorkem, 2009. "Mechanism design with collusive supervision," Journal of Economic Theory, Elsevier, vol. 144(1), pages 69-95, January.
    8. Che,Y.-K. & Kim,J., 2004. "Collusion-proof implementation of optimal mechanisms," Working papers 4, Wisconsin Madison - Social Systems.
    9. Joseph E. Harrington, Jr, 2005. "Detecting Cartels," Economics Working Paper Archive 526, The Johns Hopkins University,Department of Economics.
    10. Rachmilevitch, Shiran, 2015. "Bribing in second-price auctions," Games and Economic Behavior, Elsevier, vol. 92(C), pages 191-205.
    11. Tan, Guofu & Yilankaya, Okan, 2007. "Ratifiability of efficient collusive mechanisms in second-price auctions with participation costs," Games and Economic Behavior, Elsevier, vol. 59(2), pages 383-396, May.
    12. Patrick Bajari & Garrett Summers, "undated". "Detecting Collusion in Procurement Auctions: A Selective Survey of Recent Research," Working Papers 01014, Stanford University, Department of Economics.
    13. 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.
    14. Che, Yeon-Koo & Condorelli, Daniele & Kim, Jinwoo, 2018. "Weak cartels and collusion-proof auctions," Journal of Economic Theory, Elsevier, vol. 178(C), pages 398-435.
    15. Mookherjee, Dilip & Motta, Alberto & Tsumagari, Masatoshi, 2020. "Consulting collusive experts," Games and Economic Behavior, Elsevier, vol. 122(C), pages 290-317.
    16. Olga Gorelkina, 2018. "Collusion via Information Sharing and Optimal Auctions," Working Papers 20182, University of Liverpool, Department of Economics.
    17. Lee, Gea M., 2010. "Optimal collusion with internal contracting," Games and Economic Behavior, Elsevier, vol. 68(2), pages 646-669, March.
    18. Dawen Meng & Guoqiang Tian & Zhe Yang, 2017. "Two-agent collusion-proof implementation with correlation and arbitrage," Review of Economic Design, Springer;Society for Economic Design, vol. 21(3), pages 177-229, September.
    19. Sylvain Chassang & Juan Ortner, 2019. "Collusion in Auctions with Constrained Bids: Theory and Evidence from Public Procurement," Journal of Political Economy, University of Chicago Press, vol. 127(5), pages 2269-2300.
    20. Meng, Dawen & Tian, Guoqiang, 2008. "Nonlinear Pricing with Arbitrage: On the Role of Correlation," MPRA Paper 41207, University Library of Munich, Germany.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jindec:v:57:y:2009:i:4:p:835-850. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.