On the Anatomy of the Nonfacilitating Features of the Double Auction Institution in Conspiratorial Markets

Abstract

Effective conspiracies are more easily formed in posted-offer and in' sealed bid markets than in double auction markets. A feature of double auctions is isolated as the possible source of the behavioral differences. The double auction presents conspirators with continuous temptations to defect. It also fosters additional competition among sellers for access to buyers caused by the New York rule that requires that only the (first) best offers are exposed to the market and can be replaced only by better offers. This second competition can be interpreted as a coordination problem for volume allocation which could interact with other features of the process to undermine conspiracy. The research demonstrates that the continuous temptation to defect feature has its own independent influence which can account for observed differences.