Collusion Facilitating and Collusion Breaking Power of Simultaneous Ascending and Descending Price Auctions

30 Pages Posted: 8 Oct 2009

See all articles by Alexander L. Brown

Alexander L. Brown

Texas A&M University - Department of Economics

Charles R. Plott

California Institute of Technology - Division of the Humanities and Social Sciences

Heidi J. Sullivan

affiliation not provided to SSRN

Abstract

This article demonstrates that a robust tacit collusion evolves quickly in a “collusion incubator” environment but is destroyed by the simultaneous descending price auction. Theories of collusion-producing behavior, along with the detail of the states on which strategies are conditioned, lead to a deeper understanding of how tacit collusion evolves and its necessary conditions. These theories explain how the descending price auction destroys the collusion. The experiments proceed by conducting simultaneous ascending price auctions in the collusion incubator. Then, once the tacit collusion developed, changing to the descending auction. The change moved prices from collusive levels to near-competitive levels.

JEL Classification: C71, C92, D43, D44

Suggested Citation

Brown, Alexander L. and Plott, Charles R. and Sullivan, Heidi J., Collusion Facilitating and Collusion Breaking Power of Simultaneous Ascending and Descending Price Auctions. Economic Inquiry, Vol. 47, No. 3, pp. 395-424, July 2009. Available at SSRN: https://ssrn.com/abstract=1484231 or http://dx.doi.org/10.1111/j.1465-7295.2008.00153.x

Alexander L. Brown (Contact Author)

Texas A&M University - Department of Economics ( email )

4228 TAMU
College Station, TX 77843-4228
United States
979-862-8084 (Phone)
979-847-8757 (Fax)

HOME PAGE: http://econweb.tamu.edu/abrown/

Charles R. Plott

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
337 Baxter Hall
Pasadena, CA 91125
United States
626-395-4209 (Phone)

Heidi J. Sullivan

affiliation not provided to SSRN

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