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http://ssrn.com/abstract=1718996
 
 

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Collusion and the Choice of Auction: An Experimental Study


Jeroen Hinloopen


University of Amsterdam; Tinbergen Institute

Sander Onderstal


University of Amsterdam; Tinbergen Institute

November 30, 2010

Tinbergen Institute Discussion Paper No. 10-120/1

Abstract:     
We experimentally examine the collusive properties of two commonly used auctions: the English auction (EN) and the first-price sealed-bid auction (FPSB). In theory, both tacit and overt collusion are always incentive compatible in EN while both can be incentive compatible in FPSB if the auction is repeated and bidders are patient enough. We find that the auctions do not differ in subjects’ propensity to collude overtly and in the likelihood that subjects defect from a collusive agreement. Moreover, the average winning bid does not differ between the auctions unless subjects can collude overtly. Under overt collusion, stable cartels buy at a lower price in EN than in FPSB resulting in a lower average winning bid in EN.

Number of Pages in PDF File: 21

Keywords: Collusion, English auction, First-price sealed-bid auction, Laboratory experiments

JEL Classification: C92, D44, L41

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Date posted: December 4, 2010  

Suggested Citation

Hinloopen, Jeroen and Onderstal, Sander, Collusion and the Choice of Auction: An Experimental Study (November 30, 2010). Tinbergen Institute Discussion Paper No. 10-120/1. Available at SSRN: http://ssrn.com/abstract=1718996 or http://dx.doi.org/10.2139/ssrn.1718996

Contact Information

Jeroen Hinloopen (Contact Author)
University of Amsterdam ( email )
Roetersstraat 11
Amsterdam, North Holland 1018 WB
Netherlands
+31 20 525 42 52 (Phone)
+31 20 525 42 54 (Fax)
HOME PAGE: http://www.fee.uva.nl/io/jhinloopen
Tinbergen Institute ( email )
Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands
Sander Onderstal
University of Amsterdam ( email )
Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
Tinbergen Institute ( email )
Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands
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