Bidding Rings in Repeated Auctions.

This paper considers the question of tacit collusion in repeated auctions with independent private values. McAfee and McMillan show that the extent of collusion is limited by the availability of transfers. If no transfers are possible, the private information of bidders precludes any collusive scheme beyond bid rotation (BRS), even when the cartel has unlimited enforcement.AUCTIONS ; UNCERTAINTY ; BIDDING

Time Horizon and Cooperation in Continuous Time

When subjects interact in continuous time, their ability to cooperate may dramatically increase. In an experiment, we study the impact of different time horizons on cooperation in (quasi) continuous time prisoner's dilemmas. We find that cooperation levels are similar or higher when the horizon is deterministic rather than stochastic. Moreover, a deterministic duration generates different aggregate patterns and individual strategies than a stochastic one. For instance, under a deterministic horizon subjects show high initial cooperation and a strong end-of-period reversal to defection. Moreover, they do not learn to apply backward induction but to postpone defection closer to the end.

Tacit Collusion in Repeated Auctions

This paper considers the question of tacit collusion in repeated auctions with independent private values and with limited public monitoring. McAfee and McMillan show that the extent of collusion is tied to availability of transfers. Monetary transfers allow cartels to extract full surplus. A folk theorem proved by Fudenberg at al. shows that transfers of future payoffs are almost as good if players are patient and communicate before auctions. We ask how the scope of collusion is affected if players dispense with explicit communication. Collusion better than bid rotation is still feasible, but full surplus cannot be extracted. This constraint becomes less severe with more players and large cartels can become asymptotically efficient even with very limited monitoring. (This paper is a revised version of our paper "Bidding Rings in Repeated Auctions", Rochester Center for Economic Research Working Paper No. 463 (1999).)