Collusion with a Greedy Center in Position Auctions

Emmanuel Lorenzon ()

Cahiers du GREThA (2007-2019) from Groupe de Recherche en Economie Théorique et Appliquée (GREThA)

Abstract: In this paper we aim at studying the sensitivity of the Generalized Second-Price auction to bidder collusion when monetary transfers are allowed. We propose a model of position auction that incorporates third-parties as agents facilitating collusion in complete information. We show that the first-best collusive outcome can be achieved under any Nash condition. Under the locally envy-free criterion, we find that if the collusive gain is uniformly redistributed among members, the best that can be achieved is Vickrey-Clarkes-Groves outcome. Bidders do not have sufficient incentives to reduce even more their expressed demand. We then provide elements upon which an incentive compatible fee can be set by the center. We provide conditions under which bidders can enhance efficient collusion. Doing so we also contribute to the literature on collusion in multiple-objects simultaneous auctions.

Keywords: Auctions, Online advertising, Position auctions; Bidding ring, Cartel (search for similar items in EconPapers)
JEL-codes: C72 D44 L41 M3 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-com, nep-exp, nep-gth and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:grt:wpegrt:2016-08

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