Ratifiability of efficient collusive mechanisms in second-price auctions with participation costs |
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Authors: | Guofu Tan Okan Yilankaya |
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Institution: | aDepartment of Economics, University of Southern California, KAP 300, 3620 S. Vermont Avenue, Los Angeles, CA 90089, USA;bDepartment of Economics, The University of British Columbia, 997-1873 East Mall, Vancouver, BC V6T 1Z1 Canada |
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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 Cramton, P.C., Palfrey, T.R., 1995, Ratifiable mechanisms: Learning from disagreement, Games Econ. Behav. 10 (2), 255–283] and show that when the seller uses a second-price auction with participation costs, the standard efficient cartel mechanisms such as pre-auction 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 participating in the seller's auction. |
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Keywords: | Auctions Collusion Ratifiability |
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