OPTIMAL AUCTIONS WHEN A SELLER IS BOUND TO SELL TO COLLUSIVE BIDDERS*

Nicolas Gruyer

Journal of Industrial Economics, 2009, vol. 57, issue 4, 835-850

Abstract: 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.

Date: 2009
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