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Tacit Collusion and Capacity Withholding in Repeated Uniform Price Auctions

Emmanuel Dechenaux and Dan Kovenock

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: This paper contributes to the study of tacit collusion by analyzing infinitely repeated multiunit uniform price auctions in a symmetric oligopoly with capacity constrained firms. Under both the Market Clearing and Maximum Accepted Price rules of determining the uniform price, we show that when each firm sets a price-quantity pair specifying the firm's minimum acceptable price and the maximum quantity the firm is willing to sell at this price, there exists a range of discount factors for which the monopoly outcome with equal sharing is sustainable in the uniform price auction, but not in the corresponding discriminatory auction. Moreover, capacity withholding may be necessary to sustain this out-come. We extend these results to the case where firms may set bids that are arbitrary step functions of price-quantity pairs with any finite number of price steps. Surprisingly, under the Maximum Accepted Price rule, firms need employ no more than two price steps to minimize the value of the discount factor

Keywords: Auction; Capacity; Collusion; Electricity Market; Supply Function (search for similar items in EconPapers)
JEL-codes: D43 D44 L13 L41 L94 (search for similar items in EconPapers)
Pages: 36
Date: 2005-03-01
New Economics Papers: this item is included in nep-com, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Tacit collusion and capacity withholding in repeated uniform price auctions (2007) Downloads
Working Paper: Tacit collusion and capacity withholding in repeated uniform price auctions (2007) Downloads
Working Paper: Tacit Collusion and Capacity Withholding in Repeated Uniform Price Auctions (2005) Downloads
Working Paper: Tacit Collusion and Capacity Withholding in Repeated Uniform Price Auctions (2005) Downloads
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