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Tacit Collusion in Repeated Auctions: Uniform Versus Discriminatory
Author(s) -
Fabra Natalia
Publication year - 2003
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/1467-6451.00201
Subject(s) - tacit collusion , common value auction , collusion , microeconomics , repeated game , enforcement , incentive , economics , business , game theory , law , political science
Within an infinitely repeated game, I compare the level and conduct of collusion under uniform and discriminatory auctions. For this purpose, I characterize the optimal collusive schemes and sets of sustainable profits under these auction formats. I show that uniform auctions facilitate collusion more than discriminatory auctions: the optimal penal code is equally severe under the two formats; but bidders' deviation incentives are weaker in uniform auctions given that the pay‐off irrelevant bids can be used to relax the enforcement problem. This discussion is particularly relevant after the recent reforms in the electricity industry in England & Wales, and elsewhere.