Premium
Bids as a Vehicle of (Mis)Information: Collusion in English Auctions with Affiliated Values
Author(s) -
Pagnozzi Marco
Publication year - 2011
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1530-9134.2011.00318.x
Subject(s) - collusion , bidding , common value auction , microeconomics , business , english auction , competitor analysis , order (exchange) , value (mathematics) , object (grammar) , advertising , economics , marketing , computer science , finance , artificial intelligence , machine learning
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.