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A Study of the Internal Organization of a Bidding Cartel

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Abstract:

This paper examines bidding in over 1,700 knockout auctions used by a bidding cartel (or ring) of stamp dealers in the 1990s. The knockout was conducted using a variant of the model studied by Daniel Graham, Robert Marshall, and Jean-Francois Richard (1990). Following a reduced form examination of these data, damages, induced inefficiency, and the ring's benefit from colluding are estimated using a structural model in the spirit of Emmanuel Guerre, Isabelle Perrigne, and Quang Vuong (2000). A notable finding is that nonring bidders suffered damages that were of the same order of magnitude as those of the sellers.

Document Type: Research Article

DOI: http://dx.doi.org/10.1257/aer.100.3.724

Publication date: June 1, 2010

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