Tacit collusion and capacity withholding in repeated uniform price auctions

Dechenaux, Emmanuel and Kovenock, Dan (2007): Tacit collusion and capacity withholding in repeated uniform price auctions. Published in: Rand Journal of Economics , Vol. 38, No. 4 (2007): pp. 1044-1069.

Abstract

This article analyzes tacit collusion in infinitely repeated multiunit uniform price auctions in a symmetric oligopolywith capacity-constrained firms.Under two popular definitions of the uniform price, when each firm sets a price-quantity pair, perfect collusion with equal sharing of profit is easier to sustain in the uniform price auction than in the corresponding discriminatory auction. Moreover, capacity withholding may be necessary to sustain this outcome. Even when firms may set bids that are arbitrary finite step functions of price-quantity pairs, in repeated uniform price auctions maximal collusion is attained with simple price-quantity strategies exhibiting capacity withholding.

• Item Type: MPRA Paper
• Language: English
• Keywords: Auction; Capacity; Collusion; Electricity Market; Supply Function
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; L - Industrial Organization > L4 - Antitrust Issues and Policies > L41 - Monopolization ; Horizontal Anticompetitive Practices; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D44 - Auctions; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L94 - Electric Utilities; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection

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