Rings in auctions. An experimental approach (Q5961529)

Since William Vickrey was awarded in 1996 in Nobel Memorial Prize in Economic Science for his pioneering work on auction markets, there has been a growing literature on auctions. This work represents another significant contribution to the literature, with a special focus on experimental investigations of collusion mechanisms. This book consists of six sections with five appendices for experimental data. The author is mainly interested in rings of colluding bidders in auctions when the values are private information and side payments are allowed. He attempts to derive experimental results by considering many mechanisms such as the first-price auction mechanism, the bid-bargain mechanism and the lattice mechanism. In his experiments, he limits his attention on the three-player case in which a two-player coalition is playing against a single player in the last two rounds of a certain auction. It is intriguing to see that in such a situation, the coalition's bids are lower than the theoretical prediction and the single player's bids are higher than the theoretical prediction. This is so because the single player is willing to risk a loss in order to take revenge for having been excluded from coalition. This indicates that experimental subjects do not always play according to the theoretical prediction, which is certainly a very interesting result. Besides, some auction mechanisms do not guarantee optimal solutions possibly because of cheating and strategic behavior. To sum up, this book is nicely written and recommended to anyone who finds interest in coalition in auctions. Further experiments in this direction will be most paying.