Template-Type: ReDIF-Paper 1.0
Title: Full Surplus Extraction From Colluding Bidders
Author-Name: Daniil Larionov
Author-Email: daniil.larionov@gess.uni-mannheim.de
Classification-JEL: D44, D47, C73
Keywords: Repeated Auctions, Auction Design, Collusion, Full Surplus Extraction

Abstract: I consider a repeated auction setting with colluding buyers and a seller who adjusts
reserve prices over time without long-term commitment. To model the seller’s concern for collusion, I
introduce a new equilibrium concept: collusive public perfect equilibrium (cPPE). For every strategy
of the seller I define the corresponding “buyer-game” in which the seller is replaced by Nature who
chooses the reserve prices for the buyers in accordance with the seller’s strategy. A public perfect
equilibrium is collusive if the buyers cannot achieve a higher symmetric public perfect equilibrium
payoff in the corresponding buyer-game. In a setting with symmetric buyers with private binary iid
valuations and publicly revealed bids, I find a collusive public perfect equilibrium that allows the seller
to extract the entire surplus from the buyers in the limit as the discount factor goes to 1. I therefore
show that a patient, non-committed seller can effectively fight collusion even when she can only set
reserve prices and has to satisfy stringent public disclosure requirements.

Note: 
Length: 100
Creation-Date: 2023-02
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp392
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2023_392