Perfect bidder collusion through bribe and request

DOI10.1016/J.GEB.2021.05.001MaRDI QIDQ2049458zbMATH OpenOpenAlexFDO

Authors Jingfeng Lu, Zongwei Lü, Christian Riis

Publication date 25 August 2021

Published in Games and Economic Behavior (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://arxiv.org/abs/1912.03607

zbMATH Keywords

bribecollusionmultidimensional signalingsecond-price auction

Mathematics Subject Classification ID

Auctions, bargaining, bidding and selling, and other market models (91B26)

Abstract: We study collusion in a second-price auction with two bidders in a dynamic environment. One bidder can make a take-it-or-leave-it collusion proposal, which consists of both an offer and a request of bribes, to the opponent. We show that there always exists a robust equilibrium in which the collusion success probability is one. In the equilibrium, for each type of initiator the expected payoff is generally higher than the counterpart in any robust equilibria of the single-option model (Es"{o} and Schummer (2004)) and any other separating equilibria in our model.

Review text

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.

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Cites work

• Bidder collusion
• Bidding collusion without passive updating
• Bribing and signaling in second price auctions
• Bribing in first-price auctions
• Bribing in second-price auctions
• Collusion and signaling in auctions with interdependent values
• Collusion in one-shot second-price auctions
• Collusion in second price auctions with heterogeneous bidders
• scientific article; zbMATH DE number 1149174 (Why is no real title available?)
• Mechanism Design by an Informed Principal
• Signaling Games and Stable Equilibria
• Simple collusive agreements in one-shot first-price auctions
• Strategic stability and uniqueness in signaling games
• The Principal-Agent Relationship with an Informed Principal, II: Common Values
• The Principal-Agent Relationship with an Informed Principal: The Case of Private Values

Cited in

(9)

• Collusion in second price auctions with heterogeneous bidders
• Bribing and signaling in second price auctions
• Collusion and signaling in auctions with interdependent values
• Bidder collusion
• Collusion in one-shot second-price auctions
• Joint misrepresentation with bribes
• Comparing competition and collusion: a numerical approach.
• Speculation in procurement auctions
• Simple collusive agreements in one-shot first-price auctions

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