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Is Collusion Proof Auction Expensive? Estimates from Highway Procurements

By Gaurab Aryal and Maria F. Gabrielli


Collusion in auctions affects both revenue and efficiency and are prevalent. Yet, sellers do not use collusion-proof auctions as often as they should. Why is that? We find that one reason for this could be the cost of implementing efficient collusion-proof auctions. We use California highway procurements data, to estimate the cost of implementing collusion-proof auction. Our estimates show that cost must increase by at least 10.8% to ensure efficient outcome. The cost can sometimes be as high as 48.8% (depending on the size of bidding-ring in the data).

Topics: C1 - Econometric and Statistical Methods and Methodology: General, C13 - Estimation: General, C4 - Econometric and Statistical Methods: Special Topics, D44 - Auctions, L41 - Monopolization; Horizontal Anticompetitive Practices
Year: 2012
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