Bidding collusion without passive updating

Charles Zheng

Journal of Mathematical Economics, 2019, vol. 85, issue C, 70-77

Abstract: Collusion here takes the form of a side transfer between two bidders proposed by a mediator, before a first-price auction with independent private values. I find a necessary and sufficient condition, in terms of the bidders’ prior distributions, for existence of a side transfer acceptable to all types of both bidders on path of a perfect Bayesian equilibrium. The class of distributions defined by this condition is larger than the class under the passive updating assumption in the mechanism design literature on collusion. The off-path posterior belief most conducive to collusion entails a continuation equilibrium as if the collusion vetoer were bidding against a naive, value-bidding rival.

Keywords: First-price auction; Collusion; Updating; Asymmetric auction (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:85:y:2019:i:c:p:70-77

DOI: 10.1016/j.jmateco.2019.10.001

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