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Is Collusion Proof Auction Expensive? Estimates from Highway Procurements

Aryal, Gaurab and Gabrielli, Maria F. (2012): Is Collusion Proof Auction Expensive? Estimates from Highway Procurements.

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Collusion in auctions affects both revenue and efficiency and are prevalent. Yet, sellers do not use collusion-proof auctions as often as they should. Why is that? We find that one reason for this could be the cost of implementing efficient collusion-proof auctions. We use California highway procurements data, to estimate the cost of implementing collusion-proof auction. Our estimates show that cost must increase by at least 10.8% to ensure efficient outcome. The cost can sometimes be as high as 48.8% (depending on the size of bidding-ring in the data).

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