Two Models of Bid-Taker Cheating in Vickrey Auctions

Posted: 3 May 2000

See all articles by Michael H. Rothkopf

Michael H. Rothkopf

Rutgers University, Piscataway

Ron Harstad

University of Missouri

Abstract

Vickrey (second-price, sealed-bid) auctions have attractive theoretical properties, but standard first-price, sealed bidding is far more common. Explanations of the rarity of Vickrey auctions rely on concern about revelation of private information and on fear of cheating. We present two models of bid-taker cheating: a static, game-theoretic model and reputation-based model of repeated auctions. In the first, an honest bid-taker will not choose a Vickrey auction. In the second, a trusted bid-taker who cheats when it pays eventually destroys his reputation and the trust upon which the use of Vickrey auctions depends.

JEL Classification: C7

Suggested Citation

Rothkopf, Michael H. and Harstad, Ronald M, Two Models of Bid-Taker Cheating in Vickrey Auctions. JOURNAL OF BUSINESS, Vol 68 No 2, April 1995. Available at SSRN: https://ssrn.com/abstract=6109

Michael H. Rothkopf (Contact Author)

Rutgers University, Piscataway ( email )

Rutgers Business School and RUTCOR
Rutcor Modular Bldg, Room 121
Piscataway, NJ 08854
United States
732-445-0266 (Phone)
732-445-5472 (Fax)

Ronald M Harstad

University of Missouri ( email )

United States

HOME PAGE: http://harstad.missouri.edu

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