Econometrica: Jul 2009, Volume 77, Issue 4

Collusion via Resale

https://doi.org/10.3982/ECTA7504
p. 1095-1136

Rodney J. Garratt, Thomas Tröger, Charles Z. Zheng

The English auction is susceptible to tacit collusion when post‐auction interbidder 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 postbidding spoil division.

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