Working papers:

Optimal collusion-proof auctions

Title:: Optimal collusion-proof auctions
Author(s):: Che, Yeon-Koo
Kim, Jinwoo
Date:: 2007
Type:: Working papers
Handle:: http://hdl.handle.net/10022/AC:P:15442
Series:: Department of Economics Discussion Papers
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 nontrivial probability of the object not being sold. In case the second-best outcome is not weak collusion-proof implementable, we characterize an optimal collusion-proof auction. This auction involves nontrivial exclusion of collusive bidders - i.e., the object is not sold to any collusive bidder with positive probability.
Subject(s):: Economic theory