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 Please use this identifier to cite or link to this item: http://hdl.handle.net/1807/16627

 Title: Auction design in the presence of collusion Authors: Gregory Pavlov; Department of Economics, University of Western Ontario Keywords: Collusion, mechanism design, auctionsC61, D44, D82, L41 Issue Date: 1-Sep-2008 Publisher: Theoretical Economics Citation: Theoretical Economics; Vol 3, No 3 (2008) Abstract: [This item is a preserved copy. To view the original, visit http://econtheory.org/] We study a problem of optimal auction design in the realistic case in which the players can collude both on the way they play in the auction and on their participation decisions. Despite the fact that the principal's opportunities for extracting payments from the agents in such a situation are limited, we show how the asymmetry of information between the colluding agents can be used to reduce the revenue losses from collusion. In a class of environments we show that the principal is even able to achieve the same revenue as when the agents do not collude. For cases in which it is not possible to do so we provide an optimal mechanism in the class of mechanisms with linear and symmetric menus and discuss the potential benefits of using asymmetric and nonlinear mechanisms. To address the problem of multiplicity of equilibria we show how the optimal mechanisms can be implemented as uniquely collusion-proof mechanisms. URI: http://hdl.handle.net/1807/16627 Other Identifiers: http://econtheory.org/ojs/index.php/te/article/view/20080383 Rights: Authors who publish in Theoretical Economics will release their articles under the Creative Commons Attribution-NonCommercial license. This license allows anyone to copy and distribute the article for non-commercial purposes provided that appropriate attribution is given. Appears in Collections: Volume 3, Number 3 (September 2008)

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