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Tacit collusion in auctions and conditions for its facilitation and prevention: equilibrium selection in laboratory experimental markets

Li, Jin and Plott, Charles R. (2009) Tacit collusion in auctions and conditions for its facilitation and prevention: equilibrium selection in laboratory experimental markets. Economic Inquiry, 47 (3). pp. 425-448. ISSN 0095-2583

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Identification Number: 10.1111/j.1465-7295.2008.00152.x

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.”

Item Type: Article
Official URL: http://onlinelibrary.wiley.com/journal/10.1111/(IS...
Additional Information: © 2009 Wiley
Divisions: Management
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Sets: Departments > Management
Date Deposited: 10 Oct 2017 10:00
Last Modified: 20 Jan 2020 03:59
URI: http://eprints.lse.ac.uk/id/eprint/84529

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