Collusion and the Choice of Auction: An Experimental Study

Tinbergen Institute Discussion Paper No. 10-120/1

21 Pages Posted: 4 Dec 2010  

Jeroen Hinloopen

CPB Netherlands Bureau of Economic Policy Analysis; University of Amsterdam - Amsterdam School of Economics (ASE); Tinbergen Institute

Sander Onderstal

University of Amsterdam; Tinbergen Institute

Date Written: November 30, 2010

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.

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

JEL Classification: C92, D44, L41

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: https://ssrn.com/abstract=1718996 or http://dx.doi.org/10.2139/ssrn.1718996

Jeroen Hinloopen (Contact Author)

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

University of Amsterdam - Amsterdam School of Economics (ASE) ( email )

Roetersstraat 11
Amsterdam, North Holland 1018 WB
Netherlands

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

Paper statistics

Downloads
88
Rank
240,959
Abstract Views
612