Collusion in Uniform-Price Auctions: Experimental Evidence and Implications for Treasury Auctions.

Abstract

We provide experimental evidence that nonbinding preplay communication between bidders in auctions of shares facilitates the adoption of equilibrium strategies: cohesive strategies in uniform-price auctions, and the unique equilibrium in undominated strategies in discriminatory auctions. When communication between bidders is introduced, clearing prices and auctioneer profits in uniform-price auctions fall below those observed in discriminatory auctions. This evidence suggests that uniform price auctions of Treasury securities may result in lower revenues than the currently employed discriminatory procedure. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.