Misbehavior in Common Value Auctions: Bidding Rings and Shills

Abstract

We characterize the optimal misbehavior by bidding rings or an auctioneer in the ascending English auction with common values. We also show, in an extended game, that in equilibrium potential members join and truthfully reveal their signals. Under a separability assumption, behavior does not change if nonring bidders are informed about the ring’s existence. In general, misbehavior in dynamic settings is more profitable than in outcome-equivalent static settings. However, under a stronger separability assumption, the ring can do no better in the dynamic English format than in the outcome-equivalent, static Sophi format. (JEL D44, D82)