A simple model of coalitional bidding

Rajiv Vohra, Inkoo Cho and Kevin Jewell

Economic Theory, 2002, vol. 19, issue 3, 435-457

Abstract: We analyze a model of coalitional bidding in which coalitions form endogenously and compete with each other. Since the nature of this competition influences the way in which agents organize themselves into coalitions, our main aim is to characterize the equilibrium coalition structure and the resulting bids. We do so in a simple model in which the seller may have good reason to allow joint bidding. In particular, we study a model in which the agents are budget constrained, and are allowed to form coalitions to pool their finances before engaging in the first price auction. We show that if the budget constraint is very severe, the equilibrium coalition structure consists of two coalitions, one slightly larger than the other; interestingly, it is not the grand coalition. This equilibrium coalition structure is one which yields (approximately) the maximum expected revenue. Thus the seller can induce the optimal (revenue maximizing) degree of cooperation among budget constrained buyers simply by permitting them to collude.

Keywords: Auctions; Coalitions; Collusion; Joint bidding. (search for similar items in EconPapers)
JEL-codes: C71 C72 D44 (search for similar items in EconPapers)
Date: 2001-12-20
Note: Received: June 25, 1999; revised version: November 13, 2000
References: Add references at CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://link.springer.de/link/service/journals/00199/papers/2019003/20190435.pdf (application/pdf)
Access to the full text of the articles in this series is restricted

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:joecth:v:19:y:2002:i:3:p:435-457

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().