Optimal collusion-proof auctions |
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Authors: | Yeon-Koo Che |
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Affiliation: | a Columbia University, Economics Department, 420 West 118th Street, New York, United States b Yonsei University, School of Economics, Republic of Korea |
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Abstract: | We study an optimal collusion-proof auction in an environment where subsets of bidders may collude not just on their bids but also on their participation. Despite their ability to collude on participation, informational asymmetry facing the potential colluders can be exploited significantly to weaken their collusive power. The second-best auction — i.e., the optimal auction in a collusion-free environment — can be made collusion-proof, if at least one bidder is not collusive, or there are multiple bidding cartels, or the second-best outcome involves a non-trivial probability of the object not being sold. Regardless, optimal collusion-proof auction prescribes non-trivial exclusion of collusive bidders, i.e., a refusal to sell to any collusive bidder with positive probability. |
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Keywords: | D44 D82 D86 L13 |
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