The vulnerability of auctions to bidder collusion

Previous work has addressed the relative vulnerability of di¤erent auction schemes to collusive bidding. The common wisdom is that ascending-bid and second-price auctions are highly susceptible to collusion. We show that the details of ascending-bid and second price auctions, including bidder registration procedures and procedures for information revelation during the auction, can be designed to completely inhibit, or unintentionally facilitate, certain types of collusion. If auctions are designed without acknowledging the possibility of collusion then the design will ignore key features that impact the potential success of colluding bidders. The authors thank the Human Capital Foundatio