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Journal Articles Journal of Economic Theory Year : 2009

The Shill Bidding Effect versus the Linkage Principle

Abstract

The analysis of second price auctions with externalities is utterly modified if the seller is unable to commit not to participate in the mechanism. For the General Symmetric Model introduced by Milgrom and Weber [P. Milgrom, R. Weber, A theory of auctions and competitive bidding, Econometrica 50 (1982) 1089-1122] we characterize the full set of separating equilibria that are symmetric among buyers and with a strategic seller being able to bid in the same way as any buyer through a so-called shill bidding activity. The revenue ranking between first and second price auctions is different from the one arising in Milgrom and Weber: the benefits from the highlighted 'Linkage Principle' are counterbalanced by the 'Shill Bidding Effect.'

Dates and versions

halshs-00754404 , version 1 (20-11-2012)

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Laurent Lamy. The Shill Bidding Effect versus the Linkage Principle. Journal of Economic Theory, 2009, 144 (1), pp.390-413. ⟨10.1016/j.jet.2008.06.001⟩. ⟨halshs-00754404⟩
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