Collusion via Information Sharing and Optimal Auctions

18^th April 2018, 13:00
Olga Gorelkina
University of Liverpool

Abstract

This paper formally introduces the concept of collusion via information sharing in the context of auctions. The model of collusion via information sharing builds on Aumann's (1976) description of knowledge. Robustness of auction mechanisms to collusion via information sharing is defined as the impossibility of an agreement to collude. A cartel can agree to collude on a contract if it is common knowledge within that cartel that the contract is incentive compatible and individually rational. Robust mechanisms are characterised in a number of settings where some, all, or no bidders are bound by limited liability. Finally, the characterisation is used in a simple IPV setting to design a mechanism that is both optimal and collusion-robust.