Full Surplus Extraction From Colluding Bidders

Daniil Larionov ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: I consider a repeated auction setting with colluding buyers and a seller who adjusts reserve prices over time without long-term commitment. To model the seller’s concern for collusion, I introduce a new equilibrium concept: collusive public perfect equilibrium (cPPE). For every strategy of the seller I define the corresponding “buyer-game” in which the seller is replaced by Nature who chooses the reserve prices for the buyers in accordance with the seller’s strategy. A public perfect equilibrium is collusive if the buyers cannot achieve a higher symmetric public perfect equilibrium payoff in the corresponding buyer-game. In a setting with symmetric buyers with private binary iid valuations and publicly revealed bids, I find a collusive public perfect equilibrium that allows the seller to extract the entire surplus from the buyers in the limit as the discount factor goes to 1. I therefore show that a patient, non-committed seller can effectively fight collusion even when she can only set reserve prices and has to satisfy stringent public disclosure requirements.

Keywords: Repeated Auctions; Auction Design; Collusion; Full Surplus Extraction (search for similar items in EconPapers)
JEL-codes: C73 D44 D47 (search for similar items in EconPapers)
Pages: 100
Date: 2023-02
New Economics Papers: this item is included in nep-com, nep-cta, nep-des, nep-gth, nep-mic and nep-reg
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