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Collusion through Communication in Auctions

Agranov, Marina and Yariv, Leeat (2015) Collusion through Communication in Auctions. California Institute of Technology , Pasadena, CA. (Unpublished)

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We study the extent to which communication can serve as a collusion device in one-shot first- and second-price sealed-bid auctions. Theoretically, second-price auctions are more fragile to collusion through communication than first-price auctions. In an array of laboratory experiments we vary the amount of interactions (communication and/or transfers without commitment) available to bidders. We find that the auctioneer's revenues decrease significantly when bidders can communicate. When, in addition, bidders can make transfer promises, revenues decline substantially, with 70% of our experimental auctions culminating in the object being sold for approximately the minimal price. Furthermore, the effects of communication and transfers are similar across auction formats.

Item Type:Report or Paper (Working Paper)
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Additional Information:October 26, 2015. We thank Dino Gerardi, Ben Gillen, Sotiris Georganas, Stephen Morris, and Jean-Laurent Rosenthal for useful discussions and suggestions and Joy Basinger, Tatiana Mayskaya and Li Song for superb research assistance. We gratefully acknowledge financial support from the National Science Foundation (SES 0963583) and the Gordon and Betty Moore Foundation (Grant 1158).
Funding AgencyGrant Number
Gordon and Betty Moore Foundation1158
Subject Keywords:Auctions, Communication, Collusion, Experiments
Record Number:CaltechAUTHORS:20160229-145403385
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:64864
Deposited By: Susan Vite
Deposited On:08 Mar 2016 19:27
Last Modified:03 Oct 2019 09:41

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