On stability of efficient cartel mechanisms in first-price auctions with uninformed bidders

Xiaoyong Cao, Shao-Chieh Hsueh and Wei Wang

Economics Letters, 2020, vol. 187, issue C

Abstract: This paper investigates the stability of the efficient cartel mechanism in a sealed-bid first-price auction. We find that even if bidders are not informed about who else participates in the auction when they submit bids, the cartel is not stable. Hence, the instability of cartels does not hinge on the information structure imposed on the bidders. A seller does not have to reveal who participates in the auction to prevent them from forming a cartel.

Keywords: Stability; Efficient cartel mechanism; First-price auctions; Participation costs (search for similar items in EconPapers)
JEL-codes: D44 D61 D82 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:187:y:2020:i:c:s0165176519304665

DOI: 10.1016/j.econlet.2019.108918

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