Working paper 00/029 - Abstract

Bid Rotation and Collusion in Repeated Auctions

Masaki Aoyagi

University of Pittsburg

This paper studies bidder collusion with communication in repeated auctions when no side transfer is possible. It presents a simple dynamic bid rotation scheme which co-ordinates bids based on communication history and enables intertemporal transfer of bidders' payoffs. The paper derives a sufficient condition for such a dynamic scheme to be an equilibrium and characterises the equilibrium payoffs in a general environment with affiliated signals and private or interdependent values. With IPV, it is shown that this dynamic scheme yields a strictly higher payoff to the bidders than any static collusion scheme which co-ordinates bids based only on the current reported signals.

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