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Deterring collusion with a reserve price: an auction experiment

Pacharasut Sujarittanonta and Ajalavat Viriyavipart ()
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Pacharasut Sujarittanonta: Faculty of Economics, Chulalongkorn University

Experimental Economics, 2021, vol. 24, issue 2, No 7, 536-557

Abstract: Abstract We experimentally compare collusive behaviors in first-price sealed-bid auctions without and with a reserve price. Before the auction begins, a bidder may offer a bribe to the other bidder, in exchange for a commitment not to participate in the auction. We find that the average offer and the rate of successful bribes are significantly lower in the treatment with a reserve price. These results are largely due to responding bidders who demand a greater share of the benefit from collusion. Although imposing a reserve price reduces efficiency, its optimality and bribe deterrence shift the surplus from the bidders to the seller.

Keywords: Collusion; Reserve price; Auctions; Bribes; Experiment (search for similar items in EconPapers)
JEL-codes: C72 C91 D44 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s10683-020-09671-x

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