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COLLUSION FACILITATING AND COLLUSION BREAKING POWER OF SIMULTANEOUS ASCENDING AND DESCENDING PRICE AUCTIONS |
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| Authors: | ALEXANDER L BROWN CHARLES R PLOTT and HEIDI J SULLIVAN |
| Institution: | Brown:;Graduate Student, Division of the Humanities and Social Sciences, California Institute of Technology, 1200 E. California Blvd, MC 228-77, Pasadena, CA 91125. Phone 626 395 1790, Fax 626 405 9841, E-mail Plott:;Edward S. Harkness Professor of Economics and Political Science, Division of the Humanities and Social Sciences, California Institute of Technology, 1200 E. California Blvd, MC 228-77, Pasadena, CA 91125. Phone 626 395 4209, Fax 626 793 8580, E-mail Sullivan:;Graduate Student, Division of the Humanities and Social Sciences, California Institute of Technology, 1200 E. California Blvd, MC 228-77, Pasadena, CA 91125. Phone 626 395 4052, Fax 626 405 9841, E-mail |
| Abstract: | This article demonstrates that a robust tacit collusion evolves quickly in a "collusion incubator" environment but is destroyed by the simultaneous descending price auction. Theories of collusion-producing behavior, along with the detail of the states on which strategies are conditioned, lead to a deeper understanding of how tacit collusion evolves and its necessary conditions. These theories explain how the descending price auction destroys the collusion. The experiments proceed by conducting simultaneous ascending price auctions in the collusion incubator. Then, once the tacit collusion developed, changing to the descending auction. The change moved prices from collusive levels to near-competitive levels. ( JEL C71, C92, D43, D44) |
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