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- Title
TACIT COLLUSION IN AUCTIONS AND CONDITIONS FOR ITS FACILITATION AND PREVENTION: EQUILIBRIUM SELECTION IN LABORATORY EXPERIMENTAL MARKETS.
- Authors
LI, JIN; PLOTT, CHARLES R.
- Abstract
The paper studies bidder behavior in simultaneous, continuous, ascending price auctions. We design and implement a “collusion incubator” environment based on a type of public, symmetrically “folded” and “item-aligned” preferences. Tacit collusion develops quickly and reliably within the environment. Once tacit collusion developed, it proved remarkably robust to institutional changes that weakened it as an equilibrium of a game-theoretic model. The only successful remedy was a non-public change in the preference of participants that destroyed the symmetrically, “folded” and “item aligned” patterns of preferences, creating head-to-head competition between two agents reminiscent of the concept of a “maverick.”( JEL L50, L94, D43)
- Subjects
COLLUSION; PRICE fixing; TACIT knowledge; AUCTIONS; GAME theory; ECONOMIC equilibrium; MATHEMATICAL models; VALUATION
- Publication
Economic Inquiry, 2009, Vol 47, Issue 3, p425
- ISSN
0095-2583
- Publication type
Article
- DOI
10.1111/j.1465-7295.2008.00152.x