ART - Sequential Auctions Collusive Drawbacks 2011

The document discusses a model of collusion among bidders in simultaneous and sequential first-price auctions. The model assumes that there are n dominant, colluding bidders with the highest valuations and a fringe of m-n independent bidders with lower valuations. The bidders' private values are defined in terms of distances from the average, with higher values indicating more scattered private values and greater asymmetry among bidders. The document explores the sustainability of collusion under different auction formats and variations of the basic model. It also analyzes the effect of different disclosure policies. The document concludes that collusion can be sustained through "grim trigger" strategies, where players have an incentive to collude in a subgame. This finding provides insight into the dynamics of collusion in auctions and its impact on market outcomes.