Controlling Collusion in Auctions: The Role of Ceilings and Reserve Prices

Roy Chowdhury, Prabal (2006): Controlling Collusion in Auctions: The Role of Ceilings and Reserve Prices. Unpublished.

Abstract

We examine a simple model of collusion under a single-object second-price auction. Under the appropriate parameter conditions, in particular as long as collusion is neither too easy, nor too difficult, we find that the optimal policy involves both an effective ceiling, as well as a reserve price.

• Item Type: MPRA Paper
• Institution: Indian Statistical Institute, Delhi Center
• Language: English
• Keywords: Auctions; ceilings; collusion; reserve prices
• Subjects: D - Microeconomics > D4 - Market Structure and Pricing > D44 - Auctions; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games

References

Banerjee, P. and A. Chakroborty, 2005, Auctions with ceilings, mimeo.

Che, Y. and I.L. Gale, 1998, Caps on political lobbying, American Economic Review 88, 643-651.

Eso, P. and J. Schummer, 2004, Bribing and signalling in second-price auctions, Games and Economic Behavior 47, 299-324.

Gavious, A., B. Moldovanu and A. Sela, 2002, Bid costs and endogenous bid-caps, RAND Journal of Economics 33, 709-722.

Graham, D.A. and R.C. Marshall, 1987, Collusive bidder behavior at single-object second-price and English auctions, Journal of Political Economy 95, 1217-1239.

Kirkegaard, R., 2005, Participation fees vs. reserve prices in auctions with asymmetric or colluding bidders, Economics Letters 89, 328-332.

Milgrom, P., 2004, Putting auction theory to work (Cambridge University Press, Cambridge).