2005), ‘Tacit Collusion in Auctions and Conditions for Its Facilitation and Prevention

The paper studies bidder behavior in simultaneous, continuous, ascending price auctions. We design and implement a ‘‘collusion incubator’ ’ environment based on a type of public, symmetrically ‘‘folded’ ’ and ‘‘item-aligned’ ’ preferences. Tacit collusion develops quickly and reliably within the environment. Once tacit collusion developed, it proved remarkably robust to institutional changes that weakened it as an equilibrium of a game-theoretic model. The only successful remedy was a non-public change in the preference of participants that destroyed the symmetrically, ‘‘folded’ ’ and ‘‘item aligned’ ’ patterns of preferences, creating head-to-head competition between two agents reminiscent of the concept of a ‘‘maverick.’ ’ (JEL L50, L94, D43) I