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Collusion with Three Bidders at First-Price Auctions

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 authors’earlier 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.

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Advisor: Leslie Marx


Undergraduate Program Assistant
Matthew Eggleston

Director of the Honors Program
Michelle P. Connolly