IDEAS home Printed from https://ideas.repec.org/a/bla/randje/v52y2021i3p662-690.html
   My bibliography  Save this article

Patent auctions and bidding coalitions: structuring the sale of club goods

Author

Listed:
  • John Asker
  • Mariagiovanna Baccara
  • SangMok Lee

Abstract

Auctioneers of patents are observed to allow joint bidding by coalitions of buyers. These auctions are distinguished by the good for sale being nonrivalrous, but still excludable, in consumption—that is, they auctions of club goods. This affects how coalitional bidding impacts auction performance. We study the implications of coalitions of bidders on second‐price (or equivalently, ascending‐price) auctions. Although the formation of coalitions can benefit the seller, we show that stable coalition profiles tend to consist of excessively large coalitions, to the detriment of both auction revenue and social welfare. Limiting the permitted coalition size increases efficiency and confers benefits on the seller. Lastly, we compare the revenues generated by patent auctions and multilicense auctions, and we find that the latter are superior in a large class of environments.

Suggested Citation

  • John Asker & Mariagiovanna Baccara & SangMok Lee, 2021. "Patent auctions and bidding coalitions: structuring the sale of club goods," RAND Journal of Economics, RAND Corporation, vol. 52(3), pages 662-690, September.
    • Handle: RePEc:bla:randje:v:52:y:2021:i:3:p:662-690
    DOI: 10.1111/1756-2171.12387
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1756-2171.12387
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1756-2171.12387?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
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Heidrun C. Hoppe & Philippe Jehiel & Benny Moldovanu, 2006. "License Auctions and Market Structure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(2), pages 371-396, June.
    2. Hanming Fang & Peter Norman, 2010. "Optimal Provision of Multiple Excludable Public Goods," American Economic Journal: Microeconomics, American Economic Association, vol. 2(4), pages 1-37, November.
    3. Eso, Peter & Schummer, James, 2004. "Bribing and signaling in second price auctions," Games and Economic Behavior, Elsevier, vol. 47(2), pages 299-324, May.
    4. Sandro Brusco & Giuseppe Lopomo, 2002. "Collusion via Signalling in Simultaneous Ascending Bid Auctions with Heterogeneous Objects, with and without Complementarities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(2), pages 407-436.
    5. McAfee, R Preston & McMillan, John, 1992. "Bidding Rings," American Economic Review, American Economic Association, vol. 82(3), pages 579-599, June.
      • McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
    6. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721, October.
    7. Marhsall, Robert C. & Marx, Leslie M., 2014. "The Economics of Collusion: Cartels and Bidding Rings," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262525941, April.
    8. Chatterjee, Kalyan & Mitra, Manipushpak & Mukherjee, Conan, 2017. "Bidding rings: A bargaining approach," Games and Economic Behavior, Elsevier, vol. 103(C), pages 67-82.
    9. Eric Maskin & John Riley, 2000. "Equilibrium in Sealed High Bid Auctions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(3), pages 439-454.
    10. 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.
    11. Cantillon, Estelle, 2008. "The effect of bidders' asymmetries on expected revenue in auctions," Games and Economic Behavior, Elsevier, vol. 62(1), pages 1-25, January.
    12. Troyan, Peter, 2017. "Collusion and signaling in auctions with interdependent values," Journal of Economic Theory, Elsevier, vol. 170(C), pages 319-345.
    13. Wooders, Myrna & Cartwright, Edward & Selten, Reinhard, 2006. "Behavioral conformity in games with many players," Games and Economic Behavior, Elsevier, vol. 57(2), pages 347-360, November.
    14. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996. "How (Not) to Sell Nuclear Weapons," American Economic Review, American Economic Association, vol. 86(4), pages 814-829, September.
    15. Che, Yeon-Koo & Kim, Jinwoo, 2009. "Optimal collusion-proof auctions," Journal of Economic Theory, Elsevier, vol. 144(2), pages 565-603, March.
    16. Dutta, Bhaskar & Vohra, Rajiv, 2005. "Incomplete information, credibility and the core," Mathematical Social Sciences, Elsevier, vol. 50(2), pages 148-165, September.
    17. Harris, Milton & Raviv, Artur, 1981. "Allocation Mechanisms and the Design of Auctions," Econometrica, Econometric Society, vol. 49(6), pages 1477-1499, November.
    18. Baccara, Mariagiovanna & Yariv, Leeat, 2016. "Choosing peers: Homophily and polarization in groups," Journal of Economic Theory, Elsevier, vol. 165(C), pages 152-178.
    19. Peter Norman, 2004. "Efficient Mechanisms for Public Goods with Use Exclusions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(4), pages 1163-1188.
    20. Bulow, Jeremy & Roberts, John, 1989. "The Simple Economics of Optimal Auctions," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1060-1090, October.
    21. Ray, Debraj & Vohra, Rajiv, 1999. "A Theory of Endogenous Coalition Structures," Games and Economic Behavior, Elsevier, vol. 26(2), pages 286-336, January.
    22. Rodney J. Garratt & Thomas Trˆger & Charles Z. Zheng, 2009. "Collusion via Resale," Econometrica, Econometric Society, vol. 77(4), pages 1095-1136, July.
    23. Rachmilevitch, Shiran, 2013. "Bribing in first-price auctions," Games and Economic Behavior, Elsevier, vol. 77(1), pages 214-228.
    24. Francesco Decarolis & Maris Goldmanis & Antonio Penta, 2020. "Marketing Agencies and Collusive Bidding in Online Ad Auctions," Management Science, INFORMS, vol. 66(10), pages 4433-4454, October.
    25. Demange, Gabrielle, 1994. "Intermediate preferences and stable coalition structures," Journal of Mathematical Economics, Elsevier, vol. 23(1), pages 45-58, January.
    26. Yeon-Koo Che & Jinwoo Kim, 2006. "Robustly Collusion-Proof Implementation," Econometrica, Econometric Society, vol. 74(4), pages 1063-1107, July.
    27. 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.
    28. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
    29. John Asker, 2010. "A Study of the Internal Organization of a Bidding Cartel," American Economic Review, American Economic Association, vol. 100(3), pages 724-762, June.
    30. Christopher Avery & Terrence Hendershott, 2000. "Bundling and Optimal Auctions of Multiple Products," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(3), pages 483-497.
    31. Jean-Jacques Laffont & David Martimort, 1997. "Collusion under Asymmetric Information," Econometrica, Econometric Society, vol. 65(4), pages 875-912, July.
    32. Jean-Jacques Laffont & David Martimort, 2000. "Mechanism Design with Collusion and Correlation," Econometrica, Econometric Society, vol. 68(2), pages 309-342, March.
    33. Mariagiovanna Baccara & Leeat Yariv, 2013. "Homophily in Peer Groups," American Economic Journal: Microeconomics, American Economic Association, vol. 5(3), pages 69-96, August.
    34. 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.
    35. Michael L. Katz & Carl Shapiro, 1985. "On the Licensing of Innovations," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 504-520, Winter.
    36. ,, 2008. "Auction design in the presence of collusion," Theoretical Economics, Econometric Society, vol. 3(3), September.
    37. Agranov, Marina & Yariv, Leeat, 2018. "Collusion through communication in auctions," Games and Economic Behavior, Elsevier, vol. 107(C), pages 93-108.
    38. Loertscher, Simon & Marx, Leslie M., 2017. "Club good intermediaries," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 430-459.
    39. Kirkegaard, René, 2009. "Asymmetric first price auctions," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1617-1635, July.
    40. René Kirkegaard, 2012. "A Mechanism Design Approach to Ranking Asymmetric Auctions," Econometrica, Econometric Society, vol. 80(5), pages 2349-2364, September.
    Full references (including those not matched with items on IDEAS)

    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. Kaplan, Todd R. & Zamir, Shmuel, 2015. "Advances in Auctions," Handbook of Game Theory with Economic Applications,, Elsevier.
    2. Lorentziadis, Panos L., 2016. "Optimal bidding in auctions from a game theory perspective," European Journal of Operational Research, Elsevier, vol. 248(2), pages 347-371.
    3. 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.
    4. 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.
    5. 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.
    6. Troyan, Peter, 2017. "Collusion and signaling in auctions with interdependent values," Journal of Economic Theory, Elsevier, vol. 170(C), pages 319-345.
    7. Zheng, Charles Z., 2019. "Bidding collusion without passive updating," Journal of Mathematical Economics, Elsevier, vol. 85(C), pages 70-77.
    8. Che, Yeon-Koo & Kim, Jinwoo, 2009. "Optimal collusion-proof auctions," Journal of Economic Theory, Elsevier, vol. 144(2), pages 565-603, March.
    9. Olga Gorelkina, 2018. "Collusion via Information Sharing and Optimal Auctions," Working Papers 20182, University of Liverpool, Department of Economics.
    10. Hagen, Martin, 2023. "Collusion-proof mechanisms for multi-unit procurement," Games and Economic Behavior, Elsevier, vol. 138(C), pages 281-298.
    11. Agranov, Marina & Yariv, Leeat, 2018. "Collusion through communication in auctions," Games and Economic Behavior, Elsevier, vol. 107(C), pages 93-108.
    12. Rachmilevitch, Shiran, 2015. "Bribing in second-price auctions," Games and Economic Behavior, Elsevier, vol. 92(C), pages 191-205.
    13. 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.
    14. Asseyer, Andreas, 2016. "Optimal Information Disclosure and Collusion," VfS Annual Conference 2016 (Augsburg): Demographic Change 145779, Verein für Socialpolitik / German Economic Association.
    15. Wang, Hong, 2017. "Information acquisition versus information manipulation in multi-period procurement markets," Information Economics and Policy, Elsevier, vol. 40(C), pages 48-59.
    16. Correia-da-Silva, João, 2020. "Self-rejecting mechanisms," Games and Economic Behavior, Elsevier, vol. 120(C), pages 434-457.
    17. Mookherjee, Dilip & Motta, Alberto & Tsumagari, Masatoshi, 2020. "Consulting collusive experts," Games and Economic Behavior, Elsevier, vol. 122(C), pages 290-317.
    18. Dutta, Rohan & Levine, David Knudsen & Modica, Salvatore, 2018. "Collusion constrained equilibrium," Theoretical Economics, Econometric Society, vol. 13(1), January.
    19. Asseyer, Andreas, 2020. "Collusion and delegation under information control," Discussion Papers 2020/3, Free University Berlin, School of Business & Economics.
    20. Che,Y.-K. & Kim,J., 2004. "Collusion-proof implementation of optimal mechanisms," Working papers 4, Wisconsin Madison - Social Systems.

    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • K1 - Law and Economics - - Basic Areas of Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

    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:randje:v:52:y:2021:i:3:p:662-690. 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: https://edirc.repec.org/data/randdus.html .

    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.