Perfect bidder collusion through bribe and request (Q2049458)

The paper is devoted to the possible generalization of the known dynamic model [\textit{P. Eső} and \textit{J. Schummer}, Games Econ. Behav. 47, No. 2, 299--324 (2004; Zbl 1068.91022)] of bidder collusion in a second-price auction, before which a bidder has the opportunity to make a take-it-or-leave-it offer of a bribe in exchange for the opponent's absence from the auction (or bidding zero). Specifically, the authors assume that a bidder has an opportunity to make a take-it-or-leave-it collusion proposal consisting of both a bribe and a request to the opponent before a second-price auction starts. The opponent can accept at most one option in the proposal in which case both bidders follow the proposal and bid cooperatively in the auction. If the opponent rejects the proposal then both bidders compete noncooperatively in the auction. It is shown that there always exists a robust equilibrium in which the collusion success probability is one. Section 5 briefly discusses the role of the reserve price and the transition to a first price auction. All proofs are relegated to the appendices.