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

Guofu Tan and Okan Yilankaya

Microeconomics.ca working papers from Vancouver School of Economics

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 bidding 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: 0 pages
Date: 2004-04-30, Revised 2006-06-09
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Related works:
Journal Article: Ratifiability of efficient collusive mechanisms in second-price auctions with participation costs (2007)
Working Paper: Ratifiability of Efficient Collusive Mechanisms in Second-Price Auctions with Participation Costs (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ubc:pmicro:tan-04-04-30-01-35-41

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