Inefficiency of collusion at english auctions

Giuseppe Lopomo, Robert C. Marshall, Leslie M. Marx

Research output: Contribution to journalArticlepeer-review

16 Scopus citations


In its attempts to deter and prosecute big rigging, U.S. antitrust authorities have focused on sealed-bid procurements, rather than on ascending-bid auctions. One possible justification for this focus is the idea, supported by the existing theoretical literature, that collusion creates inefficiency at sealed-bid auctions, but not at ascending-bid auctions. We show when there is no pre-auction communication and the collusive mechanism satisfies ex-post budget balance, collusion does affect efficiency. In particular, any collusive mechanism that increases cartel members' expected payoffs relative to non-cooperative play results in inefficiency either in the allocation among cartel members or in the allocation between cartel and non-cartel bidders, or both.

Original languageEnglish (US)
JournalContributions to Theoretical Economics
Issue number1
StatePublished - 2005

All Science Journal Classification (ASJC) codes

  • General Economics, Econometrics and Finance


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