Abstract
We investigate whether efficient collusive bidding mechanisms are affected by potential information leakage from bidders' decisions to participate in them within the independent private values setting. We apply the concept of ratifiability introduced by Cramton and Palfrey [Cramton, P.C., Palfrey, T.R., 1995, Ratifiable mechanisms: Learning from disagreement, Games Econ. Behav. 10 (2), 255-283] and show that when the seller uses a second-price auction with participation costs, the standard efficient cartel mechanisms such as pre-auction knockouts analyzed in the literature will not be ratified by cartel members. A high-value bidder benefits from vetoing the cartel mechanism since doing so sends a credible signal that she has high value, which in turn discourages other bidders from participating in the seller's auction.
| Original language | English |
|---|---|
| Pages (from-to) | 383-396 |
| Number of pages | 14 |
| Journal | Games and Economic Behavior |
| Volume | 59 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - May 2007 |
| Externally published | Yes |
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Keywords
- Auctions
- Collusion
- Ratifiability
ASJC Scopus subject areas
- Economics and Econometrics
- Finance
Cite this
Ratifiability of efficient collusive mechanisms in second-price auctions with participation costs. / Tan, Guofu; Yilankaya, Okan.
In: Games and Economic Behavior, Vol. 59, No. 2, 05.2007, p. 383-396.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Ratifiability of efficient collusive mechanisms in second-price auctions with participation costs
AU - Tan, Guofu
AU - Yilankaya, Okan
PY - 2007/5
Y1 - 2007/5
N2 - We investigate whether efficient collusive bidding mechanisms are affected by potential information leakage from bidders' decisions to participate in them within the independent private values setting. We apply the concept of ratifiability introduced by Cramton and Palfrey [Cramton, P.C., Palfrey, T.R., 1995, Ratifiable mechanisms: Learning from disagreement, Games Econ. Behav. 10 (2), 255-283] and show that when the seller uses a second-price auction with participation costs, the standard efficient cartel mechanisms such as pre-auction knockouts analyzed in the literature will not be ratified by cartel members. A high-value bidder benefits from vetoing the cartel mechanism since doing so sends a credible signal that she has high value, which in turn discourages other bidders from participating in the seller's auction.
AB - We investigate whether efficient collusive bidding mechanisms are affected by potential information leakage from bidders' decisions to participate in them within the independent private values setting. We apply the concept of ratifiability introduced by Cramton and Palfrey [Cramton, P.C., Palfrey, T.R., 1995, Ratifiable mechanisms: Learning from disagreement, Games Econ. Behav. 10 (2), 255-283] and show that when the seller uses a second-price auction with participation costs, the standard efficient cartel mechanisms such as pre-auction knockouts analyzed in the literature will not be ratified by cartel members. A high-value bidder benefits from vetoing the cartel mechanism since doing so sends a credible signal that she has high value, which in turn discourages other bidders from participating in the seller's auction.
KW - Auctions
KW - Collusion
KW - Ratifiability
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U2 - 10.1016/j.geb.2006.08.005
DO - 10.1016/j.geb.2006.08.005
M3 - Article
VL - 59
SP - 383
EP - 396
JO - Games and Economic Behavior
JF - Games and Economic Behavior
SN - 0899-8256
IS - 2
ER -