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OPTIMAL AUCTIONS WHEN A SELLER IS BOUND TO SELL TO COLLUSIVE BIDDERS *
Author(s) -
GRUYER NICOLAS
Publication year - 2009
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/j.1467-6451.2009.00397.x
Subject(s) - collusion , common value auction , cartel , microeconomics , simple (philosophy) , upper and lower bounds , mechanism design , business , computer science , economics , mathematics , mathematical analysis , philosophy , epistemology
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.