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Self-enforced collusion through comparative cheap talk in simultaneous auctions with entry

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Abstract

Campbell (J Econ Theory 82:425–450, 1998) develops a self-enforced collusion mechanism in simultaneous auctions based on complete comparative cheap talk and endogenous entry, with two bidders. His result is difficult to generalize to an arbitrary number of bidders, since the entry-decision stage of the game is characterized by strategic substitutes. This paper analyzes more-than-two-bidder, symmetric-prior cases. Two results are proved: (1) as the number of objects grows large, a full comparative cheap talk equilibrium exists and it yields asymptotically fully efficient collusion; and (2) there is always a partial comparative cheap talk equilibrium. All these results are supported by intuitive equilibria at the entry-decision stage (J Econ Theory 130:205–219, 2006; Math Soc Sci 2008, forthcoming). Numerical examples suggest that full comparative cheap talk equilibria are not uncommon even with few objects.

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  1. Department of Economics, Boston University, 270 Bay State Rd., Room 543, Boston, MA, 02215, USA

    Antonio Miralles

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  1. Antonio Miralles
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Correspondence to Antonio Miralles.

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Antonio Miralles is grateful to Hsueh-Lyhn Huynh, Bart Lipman, Zvika Neeman, Gregory Pavlov and an anonymous referee for their comments and suggestions. During the research, he received financial support from the Spanish Ministry of Education (SEJ2006-04985), the Fulbright Commission and Boston University.

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Miralles, A. Self-enforced collusion through comparative cheap talk in simultaneous auctions with entry. Econ Theory 42, 523–538 (2010). https://doi.org/10.1007/s00199-008-0403-3

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