Collusion via Resale

Posted by D. Daniel Sokol

Thomas Tröger (University of Bonn - Economics), Rodney Garratt (UC Santa Barbara - Economics), and Charles Zheng discuss Collusion via Resale.

ABSTRACT: The English auction is susceptible to tacit collusion when post-auction inter-bidder resale is allowed. We show this by constructing equilibria where, with positive probability, one bidder wins the auction without any competition and divides the spoils by optimally reselling the good to the other bidders. These equilibria interim Pareto dominate (among bidders) the standard value-bidding equilibrium, without requiring the bidders to make any commitment on bidding behavior or post-bidding spoil-division.