By Andrew Born
Lopomo, Marx & Sun (2009) show that, given a speci fied environment, pro table collusion is not possible for a two-person bidding ring operating at a fi rst-price sealed-bid auction. This research investigates the rigor of their result by expanding the theoretical framework to the case of a three-bidder cartel. The output generated from the linear programming model con firms the authorsearlier result. This is a key finding as it is the first to establish a basis for comparison of equilibrium surplus scenarios among multiple-bidder auction formats. The analytic and numerical results pave the way for future research examining the effect of cartel size on profi tability and have many real-world implications for both private and public policy alike.
Advisor: Leslie Marx