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Tacit Collusion in Auctions and Conditions for its Facilitation and Prevention: Equilibrium Selection in Laboratory Experimental Markets

Li, Jin and Plott, Charles R. (2009) Tacit Collusion in Auctions and Conditions for its Facilitation and Prevention: Equilibrium Selection in Laboratory Experimental Markets. Economic Inquiry, 47 (3). pp. 425-448. ISSN 0095-2583. https://resolver.caltech.edu/CaltechAUTHORS:20140128-113907570

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Abstract

The paper studies bidder behavior in simultaneous, continuous, ascending price auctions. We design and implement a “collusion incubator” environment based on a type of public, symmetrically “folded” and “item-aligned” preferences. Tacit collusion develops quickly and reliably within the environment. Once tacit collusion developed, it proved remarkably robust to institutional changes that weakened it as an equilibrium of a game-theoretic model. The only successful remedy was a non-public change in the preference of participants that destroyed the symmetrically, “folded” and “item aligned” patterns of preferences, creating head-to-head competition between two agents reminiscent of the concept of a “maverick.”


Item Type:Article
Related URLs:
URLURL TypeDescription
http://dx.doi.org/10.1111/j.1465-7295.2008.00152.xDOIArticle
http://onlinelibrary.wiley.com/doi/10.1111/j.1465-7295.2008.00152.x/abstractPublisherArticle
Additional Information:© 2008 Western Economic Association International. Online Early publication July 9, 2008. The support of the National Science Foundation and the Caltech Laboratory for Experimental Economics is gratefully acknowledged. Comments from Katerina Sherstyuk, Joseph Cook, and participants in the Caltech seminar on laboratory methods in economics and political science were very helpful.
Funders:
Funding AgencyGrant Number
NSFUNSPECIFIED
Caltech Laboratory for Experimental EconomicsUNSPECIFIED
Issue or Number:3
Classification Code:JEL: L50, L94, D43
Record Number:CaltechAUTHORS:20140128-113907570
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20140128-113907570
Official Citation:LI, J. and PLOTT, C. R. (2009), TACIT COLLUSION IN AUCTIONS AND CONDITIONS FOR ITS FACILITATION AND PREVENTION: EQUILIBRIUM SELECTION IN LABORATORY EXPERIMENTAL MARKETS. Economic Inquiry, 47: 425–448. doi: 10.1111/j.1465-7295.2008.00152.x
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:43535
Collection:CaltechAUTHORS
Deposited By: Susan Vite
Deposited On:29 Jan 2014 16:09
Last Modified:03 Oct 2019 06:08

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