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

Authors


  • I thank Alan Beggs, Ian Jewitt, Paul Klemperer, Marco LiCalzi, Francesco Sannino, the editor, and referees for extremely valuable comments. I remain responsible for all errors.

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.

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