Ceesay, Muhammed (2019) Collusion in Auctions: Secret vs Public Rings. [Tesi di dottorato]

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Abstract

This thesis analyzes whether and how an auctioneer who is aware that a ring of colluding bidders is present at the auction should reveal this information to other nonring bidders. We compare auction outcomes in four scenarios: (i) when bidders bid noncooperatively, (ii) when the presence of the ring is unknown to other bidders, (iii) when the ring presence is common knowledge, and (iv) when the ring is secretly known to nonring bidders. The thesis consists of four chapters. The first chapter motivates the analysis and lays the argument that conditional on ring presence, an auctioneer may improve his position depending on how he informs bidders regarding his suspicion/knowledge that a ring is present at the auction. The Second and Third chapters are devoted to the formal analysis in private and common value auctions respectively. In Chapter 2, we consider single-object first-price and second-price private value auctions with colluding bidders, and show that with uniformly distributed signals and a ring containing all-but-one of the bidders, it is best for the auctioneer to announce publicly if he knows that a ring is present. In this context, the first price auction is preferred to the second price auction. However, when the ring presence is known secretly to the nonring bidder, then the auctioneer is better-off under the second price auction. In Chapter 3 we consider pure common value second price auctions. Assuming the underlying signals are uniform, we show for a family of valuation functions that publicly announcing the ring presence is a dominant strategy for the auctioneer, due to the fact that it leads bidders to bid higher than when bidding purely competitively. This in addition incentivizes an auctioneer to always announce publicly that a ring is present even if it is not, essentially making bidders bid higher without using a shill. In Chapter 4, we present a brief overview of future research. We describe a Bid Coordination Mechanism a la Marshall and Marx (2007) for the first price auction based on repeated interactions.

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