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3922. EPIC Fail: How Below-Bid Pricing Backfires in Multiunit Auctions
Invited abstract in session WA-43: Market Design 2, stream Market Design.
Wednesday, 8:30-10:00Room: 99 (building: 306)
Authors (first author is the speaker)
| 1. | Daniel Marszalec
|
| 2. | Alexander Teytelboym
|
| University of Oxford | |
| 3. | Sanna Laksá
|
| P/F Varðin |
Abstract
Auctions with below-bid pricing (e.g., uniform-price, and ascending auctions) have remarkable theoretical properties, but practitioners are skeptical about their implementation. We present a dynamic model of collusion in multiunit auctions that explains this gap between theory and practice. To sustain collusion at the reserve price, bidders submit crank-handle bids. The cost of sustaining crank-handle collusion depends on the degree of below-bid pricing in the auction. Our model predicts that crank-handle collusion is easier to sustain in auctions with more below-bid pricing and when bidders are more symmetric. Evidence from auctions of fishing quota in the Faroe Islands supports our predictions.
Keywords
- Auctions / Competitive Bidding
- Game Theory
Status: accepted
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