Bribing and Signaling in the Second-Price Auction.

Journal article

Abstract:: We examine whether a two-bidder, second-price auction for a single good (with private, independent values) is immune to a simple form of collusion, where one bidder may bribe the other to commit to stay away from the auction (i.e. submit a bid of zero). In either of two cases—where the potential bribe is fixed or allowed to vary—the only robust equilibria involve bribing. In the fixed-bribe case, there is a unique such equilibrium. In the variable bribes case, all robust equilibria involve low briber-types revealing themselves through the amount they offer, while all high types offer the same bribe; only one such equilibrium is continuous. Bribing in all cases causes inefficiency.

Files:: Eso-Schummer-BribingGEB.pdf

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Copyright holder:: Elsevier Inc
Notes:: Copyright 2011 Elsevier Inc. All rights reserved. NOTICE: this is the author's version of a work that was accepted for publication in Games and Economic Behavior. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Games and Economic Behavior, 47, 2, (May 2004) DOI#10.1016/j.geb.2003.06.005

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