Fighting collusion in auctions: An experimental investigation

Hu, Audrey; Offerman, Theo; Onderstal, Sander

doi:10.1016/j.ijindorg.2009.06.003

“…In addition, to account for intrasubject and intragroup dependence over time, we estimate a three-level random effects model (see Hu et al, 2011;Bigoni et al, 2012Bigoni et al, , 2015 and present the results in Appendix B.1. The second level of clustering accounts for the dependence of each subject's observations over the 16 rounds.…”

Section: Methodsmentioning

confidence: 99%

“…Part 3 consisted of 16 rounds of a procurement auction with the opportunity to form bidding rings and our betweensubjects sanction treatment. Following closely related literature (see Hu et al, 2011), we deliberately increased complexity over these three parts to facilitate subjects' understanding of the game. In particular, Part 1 and Part 2 aimed to let subjects experience respectively a competitive environment and a collusive environment before they faced the more complex environment with both collusion and sanctions (our treatments) in Part 3.…”

Section: Experimental Designmentioning

confidence: 99%

“…Note that in weak bidding rings -such as those involving bid rotation schemes -transfers cannot be enforced. In order to avoid potential confounders such as trust and cheating, we built on existing evidence of strong bidding rings (McAfee and McMillan, 1992;Asker, 2010) and designed our experiment to allow for a PAKT (see also Hu et al, 2011;Noussair and Seres, 2017).…”

Section: Basic Gamementioning

confidence: 99%

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Debarment and Collusion in Procurement Auctions

Cerrone

¹

,

Hermstrüwer

²

,

Robalo

³

2018

SSRN Journal

2

0

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This paper explores the impact of debarment as a deterrent of collusion in first-price procurement auctions. We develop a procurement auction model where bidders can form bidding rings, and derive the bidding and collusive behavior under no sanction, debarment and fines. The model's predictions are tested through a lab experiment. We find that debarment and fines both reduce collusion and bids. The deterrent effect of debarment increases in its length. However, the debarment of colluding bidders reduces efficiency and increases the bids of non-debarred bidders. The latter suggests that the market size reduction resulting from debarment may trigger tacit collusion.JEL Codes: C92; D03; D44; K21; K42.

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“…In such auctions, however, the transfer to an unsuccessful bidder depends on the winning bid instead of the own bid, which reinforces the opportunity to affect each others' payoffs by over-or underbidding. Finally, the literature has investigated premium auctions such as the different versions of the Amsterdam auction (Goeree and Offerman, 2004;Hu et al, 2011).…”

Section: Existing Auction Formatsmentioning

confidence: 99%

An Externality-Robust Auction: Theory and Experimental Evidence

Bartling

¹

,

Netzer

²

2014

SSRN Journal

2

0

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract An auction is externality-robust if unilateral deviations from equilibrium leave the other bidders' payoffs unaffected. The equilibrium and its outcome will then persist if certain types of externalities arise between bidders. One example are externalities due to spiteful preferences, which have been used to explain overbidding in the second-price auction (SPA). Another example are cross-shareholdings between companies that compete in an auction. We derive an auction that coincides with the SPA in terms of efficiency and revenue but, in contrast to the SPA, is externality-robust. The externality-robust auction (ERA) is a first-price auction in which truthful bidding is encouraged by bonus payments. We test the robustness property experimentally by comparing SPA and ERA. We replicate the earlier finding of significant average overbidding in the SPA, but we find that bidders bid on average their value in the ERA. We conduct additional treatments where bidders play against the computer and we use controls for cognitive skills and joy of winning to further pin down the reasons behind the subjects' bidding behavior. Terms of use: Documents inKeywords: second-price auction, spitefulness, mechanism design, experimental auctions JEL Classification: C91, D03, D44, D82 * Email: bjoern.bartling@econ.uzh.ch and nick.netzer@econ.uzh.ch. We are very grateful to Felix Bierbrauer for ongoing discussions about the project. We also acknowledge very helpful comments

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“…By using coordinated strategies, bidders are able to keep prices at low levels and decrease the revenues of the auctioneer. A variety of experimental studies therefore examined the evolution of collusion in auction mechanisms (Burtraw et al, 2009;Bachrach, 2010;Zhou and Zheng, 2010;Hu et al, 2011). Generally, collusion in auctions emerges either through repeated interaction between bidders or through bidding that occurs over multiple objects (Agranov and Yariv, 2015).…”

Section: Introductionmentioning

confidence: 99%

Collusion in Multi-Object Auctions: Experimental Evidence

Matoušek

¹

,

Cingl

²

2017

Eastern European Economics

3

0

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: Terms of use: Documents inWe experimentally examine the attributes of two complex multi-unit auction mechanisms in the presence of an opportunity to collude among bidding participants due to a provision of a simple communication channel. The results suggest that the combinatorial bidding format does not bring higher efficiency. Allowing for communication increases efficiency in both examined auction formats. Bidders are able to split the auctioned goods in a cheap-talk collusive agreement, which results in a better allocation compared to the auction formats without the communication channel. Combinatorial bidding on packages makes the decision-making problem of bidders hard to process and cause inefficiencies, especially for designs with the large number of auctioned goods.

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Fighting collusion in auctions: An experimental investigation

Cited by 50 publications

References 37 publications

Debarment and Collusion in Procurement Auctions

Debarment and Collusion in Procurement Auctions

An Externality-Robust Auction: Theory and Experimental Evidence

Collusion in Multi-Object Auctions: Experimental Evidence

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