Tacti collusion in auctions and conditions for its facilitation and prevention: Equilibrium selection in laboratory experimental markets

Jin Li, Charles R. Plott

Research output: Contribution to journalArticle

7 Scopus citations

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".

Original languageEnglish (US)
Pages (from-to)425-448
Number of pages24
JournalEconomic Inquiry
Volume47
Issue number3
DOIs
StatePublished - Jul 2009

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics

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