Modeling tacit collusion in auctions

Andreas - Blume, Paul Heidhues

Research output: Contribution to journalArticle

20 Citations (Scopus)

Abstract

We study tacit collusion, which we interpret as collusion without communication about strategies, in repeated auctions in which bidders can only observe past winners and not their bids. Strategies cannot discriminate among initially nameless bidders until they have become named through winning an auction. We obtain two classes of results: (1) Completely refraining from using names rules out collusion altogether, and even if naming is permitted, as per our definition of tacit collusion, the lack of communication limits collusive strategies and payoffs among impatient bidders. (2) Sufficiently patient bidders can overcome the attainability constraints imposed by lack of communication and obtain approximately the same collusive gain as absent communication.

Original languageEnglish (US)
Pages (from-to)163-184
Number of pages22
JournalJournal of Institutional and Theoretical Economics
Volume164
Issue number1
DOIs
StatePublished - Mar 2008
Externally publishedYes

Fingerprint

Tacit collusion
Communication
Modeling
Auctions
Collusion
Communication strategies
Bid

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Modeling tacit collusion in auctions. / Blume, Andreas -; Heidhues, Paul.

In: Journal of Institutional and Theoretical Economics, Vol. 164, No. 1, 03.2008, p. 163-184.

Research output: Contribution to journalArticle

@article{958aa0d340944659afa4cb6eb276d30b,
title = "Modeling tacit collusion in auctions",
abstract = "We study tacit collusion, which we interpret as collusion without communication about strategies, in repeated auctions in which bidders can only observe past winners and not their bids. Strategies cannot discriminate among initially nameless bidders until they have become named through winning an auction. We obtain two classes of results: (1) Completely refraining from using names rules out collusion altogether, and even if naming is permitted, as per our definition of tacit collusion, the lack of communication limits collusive strategies and payoffs among impatient bidders. (2) Sufficiently patient bidders can overcome the attainability constraints imposed by lack of communication and obtain approximately the same collusive gain as absent communication.",
author = "Blume, {Andreas -} and Paul Heidhues",
year = "2008",
month = "3",
doi = "10.1628/093245608783742101",
language = "English (US)",
volume = "164",
pages = "163--184",
journal = "Journal of Institutional and Theoretical Economics",
issn = "0932-4569",
publisher = "JCB Mohr",
number = "1",

}

TY - JOUR

T1 - Modeling tacit collusion in auctions

AU - Blume, Andreas -

AU - Heidhues, Paul

PY - 2008/3

Y1 - 2008/3

N2 - We study tacit collusion, which we interpret as collusion without communication about strategies, in repeated auctions in which bidders can only observe past winners and not their bids. Strategies cannot discriminate among initially nameless bidders until they have become named through winning an auction. We obtain two classes of results: (1) Completely refraining from using names rules out collusion altogether, and even if naming is permitted, as per our definition of tacit collusion, the lack of communication limits collusive strategies and payoffs among impatient bidders. (2) Sufficiently patient bidders can overcome the attainability constraints imposed by lack of communication and obtain approximately the same collusive gain as absent communication.

AB - We study tacit collusion, which we interpret as collusion without communication about strategies, in repeated auctions in which bidders can only observe past winners and not their bids. Strategies cannot discriminate among initially nameless bidders until they have become named through winning an auction. We obtain two classes of results: (1) Completely refraining from using names rules out collusion altogether, and even if naming is permitted, as per our definition of tacit collusion, the lack of communication limits collusive strategies and payoffs among impatient bidders. (2) Sufficiently patient bidders can overcome the attainability constraints imposed by lack of communication and obtain approximately the same collusive gain as absent communication.

UR - http://www.scopus.com/inward/record.url?scp=41949119538&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=41949119538&partnerID=8YFLogxK

U2 - 10.1628/093245608783742101

DO - 10.1628/093245608783742101

M3 - Article

VL - 164

SP - 163

EP - 184

JO - Journal of Institutional and Theoretical Economics

JF - Journal of Institutional and Theoretical Economics

SN - 0932-4569

IS - 1

ER -