Optimal shill bidding in the VCG mechanism

This paper studies shill bidding in the Vickrey?CClarke?CGroves (VCG) mechanism applied to combinatorial auctions. Shill bidding is a strategy whereby a single decision-maker enters the auction under the guise of multiple identities (Yokoo et?al. Games Econ Behav, 46?pp. 174?C188, 2004). I formulate the problem of optimal shill bidding for a bidder who knows the aggregate bid of her opponents. A key to the analysis is a subproblem??the cost minimization problem (CMP)??which searches for the cheapest way to win a given package using shills. An analysis of the CMP leads to several fundamental results about shill bidding: (i) I provide an exact characterization of the aggregate bids b such that some bidder would have an incentive to shill bid against b in terms of a new property Submodularity at the Top; (ii) the problem of optimally sponsoring shills is equivalent to the winner determination problem (for single minded bidders)??the problem of finding an efficient allocation in a combinatorial auction; (iii) shill bidding can occur in equilibrium; and (iv) the problem of shill bidding has an inverse, namely the collusive problem that a coalition of bidders may have an incentive to merge (even after competition among coalition members has been suppressed). I show that only when valuations are additive can the incentives to shill and merge simultaneously disappear.     

Testing the Links between Institutional Integration and Trade Deepening: Clues from Europe

This paper investigates the interaction between institutional integration and trade deepening in the EU over the last 50 years. It uses Granger causality tests, a VECM and variance decompositions to further the understanding of this interaction. The evidence indicates two-way endogeneity. But the link from institution building to trade dominates. Yet, this link has weakened over time, possibly due to globalisation sidestepping institutions. Moreover, the sensitivity of institutional integration to trade deepening has risen, which suggests that economic forces have gained more strength in determining institutional steps.