Weak Cartels and Collusion-Proof Auctions
We study collusion in a large class of private-value auctions by cartels whose members cannot exchange monetary transfers among themselves (i.e., weak cartels). We provide a complete characterization of outcomes that are implementable in the presence of weak cartels, and identify optimal collusion-proof auctions for symmetric value distributions. When the density is single-peaked, the optimal collusion-proof auction can be implemented by a procedure that combines a second-price auction with a sequential one-on- one negotiation.
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