Detecting Collusive Behavior in Ascending Price Auctions with Endogenous Entry


Any exchange of private information or an agreement among participants regarding their behavior in an auction is prohibited by anti-trust laws. I introduce a method of empirically detecting the identities of such colluders under selective entry using the participation and bidding behavior of the potential bidders. This paper moves away from the assumption that only the ring leader is observed to participate in every auction which is usually exploited to create the suspect group. I devise a two step estimation process where the identity of the colluding members are identified from the identity of the participants, winners, and the value of the winning bid in an ascending price auction. I use the participation and winning probabilities of the bidders to create the suspect group and the identities of the colluders are detected using a pairwise comparison index.