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The collusive drawbacks of sequential auctions

Albano, G.L.; Spagnolo, G.; (2005) The collusive drawbacks of sequential auctions. (ELSE Working Papers 119). ESRC Centre for Economic Learning and Social Evolution: London, UK. Green open access

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Abstract

Sequential first-price auctions for multiple objects are very common in procurement, electricity, tobacco, timber, and oil lease markets. In this paper we identify two ways in which a sequential format may facilitate collusion among bidders relative to a simultaneous one. The first effect relates to the cartel’s ability to identify and punish defectors within the sequence, thus lowering the gains from a deviation with respect to a simultaneous format. The second effect concerns the cartel’s ability to allocate the bidder with the highest incentive to deviate (the ‘maverick’) to the last object of the sequence, thus increasing the viability of the collusive agreement. We then analyze how the seller may counteract this two effects by limiting the amount of information disclosed to bidders across rounds, and find that partial disclosure policies have little impact on the sustainability of collusion.

Type: Working / discussion paper
Title: The collusive drawbacks of sequential auctions
Open access status: An open access version is available from UCL Discovery
Publisher version: http://else.econ.ucl.ac.uk/newweb/papers.php#2005
Language: English
Keywords: JEL classification: D44, L40, C72. Auctions, collusion, disclosure policies
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/14565
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