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Ratifiability of Efficient Collusive Mechanisms in Second-Price Auctions with Participation Costs

Guofu Tan and Okan Yilankaya ()

No 05.15, IEPR Working Papers from Institute of Economic Policy Research (IEPR)

Abstract: We investigate whether efficient collusive bidding mechanisms are affected by potential information leakage from bidders’ decisions to participate in them within the independent private values setting. We apply the concept of ratifiability introduced by Cramton and Palfrey (1995) and show that when the seller uses a second-price auction with participation costs, the standard efficient cartel mechanisms such as preauction knockouts analyzed in the literature will not be ratified by cartel members. A high-value bidder benefits from vetoing the cartel mechanism since doing so sends a credible signal that she has high value, which in turn discourages other bidders from participating in the seller’s auction.

Keywords: Auctions; collusion; ratifiability (search for similar items in EconPapers)
JEL-codes: C72 D44 D82 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2005-02
New Economics Papers: this item is included in nep-com and nep-gth
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Related works:
Journal Article: Ratifiability of efficient collusive mechanisms in second-price auctions with participation costs (2007) Downloads
Working Paper: Ratifiability of Efficient Collusive Mechanisms in Second-Price Auctions with Participation Costs (2006) Downloads
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