Collusion and Equilibrium Selection in Auctions∗
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The Determinants of Efficient Behavior in Coordination Games
The Determinants of Efficient Behavior in Coordination Games Pedro Dal B´o Guillaume R. Fr´echette Jeongbin Kim* Brown University & NBER New York University Caltech May 20, 2020 Abstract We study the determinants of efficient behavior in stag hunt games (2x2 symmetric coordination games with Pareto ranked equilibria) using both data from eight previous experiments on stag hunt games and data from a new experiment which allows for a more systematic variation of parameters. In line with the previous experimental literature, we find that subjects do not necessarily play the efficient action (stag). While the rate of stag is greater when stag is risk dominant, we find that the equilibrium selection criterion of risk dominance is neither a necessary nor sufficient condition for a majority of subjects to choose the efficient action. We do find that an increase in the size of the basin of attraction of stag results in an increase in efficient behavior. We show that the results are robust to controlling for risk preferences. JEL codes: C9, D7. Keywords: Coordination games, strategic uncertainty, equilibrium selection. *We thank all the authors who made available the data that we use from previous articles, Hui Wen Ng for her assistance running experiments and Anna Aizer for useful comments. 1 1 Introduction The study of coordination games has a long history as many situations of interest present a coordination component: for example, the choice of technologies that require a threshold number of users to be sustainable, currency attacks, bank runs, asset price bubbles, cooper- ation in repeated games, etc. In such examples, agents may face strategic uncertainty; that is, they may be uncertain about how the other agents will respond to the multiplicity of equilibria, even when they have complete information about the environment. -
The Evolution of U.S. Spectrum Values Over Time
The Evolution of U.S. Spectrum Values Over Time Michelle Connolly, Department of Economics, Duke University Nelson Sa, Department of Economics, Brandeis University Azeem Zaman, Department of Statistics, Harvard University Chris Roark, Department of Economics, University of Chicago Akshaya Trivedi, Trinity College, Duke University, Class of 2018 Working Paper Series 2018 | 121 Evolution of spectrum values 1 The Evolution of U.S. Spectrum Values Over Time Michelle Connolly1, Nelson Sá2, Azeem Zaman3, Chris Roark4, and Akshaya Trivedi5 February 13, 2018 Abstract We consider 1997 to 2015 data from FCC spectrum auctions related to cellular services to attempt to identify intrinsic spectrum values. Relative to previous literature, we control for license specific auction rules, and introduce measures to separate out technological progress that effectively reduces spectrum scarcity from progress that increases demand. Results confirm that technological changes have led to increases in the relative value of higher frequencies. Surprisingly, 47 percent of these licenses have been won by “small” bidders, representing 27 percent of the real value of these licenses. The use of bidding credits further appears to consistently reduce auction competition. Keywords: Spectrum, Spectrum Scarcity, Auctions, FCC, Auction Rules, Mobile Applications, Spectral Efficiency, Broadband Speeds, Closed Auctions, Small Bidders, “The Google Effect” JEL Codes: L5, O3, K2 1 Corresponding author: Michelle Connolly, [email protected], 213 Social Sciences, Box 90097, Department of Economics, Duke University, Durham, NC 27708. 2 Department of Economics, Brandeis University. 3 Department of Statistics, Harvard University. 4 Department of Economics, University of Chicago. 5 Trinity College, Duke University Class of 2018. We gratefully acknowledge the support of NSF grant 1314468. -
Muddling Through: Noisy Equilibrium Selection*
Journal of Economic Theory ET2255 journal of economic theory 74, 235265 (1997) article no. ET962255 Muddling Through: Noisy Equilibrium Selection* Ken Binmore Department of Economics, University College London, London WC1E 6BT, England and Larry Samuelson Department of Economics, University of Wisconsin, Madison, Wisconsin 53706 Received March 7, 1994; revised August 4, 1996 This paper examines an evolutionary model in which the primary source of ``noise'' that moves the model between equilibria is not arbitrarily improbable mutations but mistakes in learning. We model strategy selection as a birthdeath process, allowing us to find a simple, closed-form solution for the stationary distribution. We examine equilibrium selection by considering the limiting case as the population gets large, eliminating aggregate noise. Conditions are established under which the risk-dominant equilibrium in a 2_2 game is selected by the model as well as conditions under which the payoff-dominant equilibrium is selected. Journal of Economic Literature Classification Numbers C70, C72. 1997 Academic Press Commonsense is a method of arriving at workable conclusions from false premises by nonsensical reasoning. Schumpeter 1. INTRODUCTION Which equilibrium should be selected in a game with multiple equilibria? This paper pursues an evolutionary approach to equilibrium selection based on a model of the dynamic process by which players adjust their strategies. * First draft August 26, 1992. Financial support from the National Science Foundation, Grants SES-9122176 and SBR-9320678, the Deutsche Forschungsgemeinschaft, Sonderfor- schungsbereich 303, and the British Economic and Social Research Council, Grant L122-25- 1003, is gratefully acknowledged. Part of this work was done while the authors were visiting the University of Bonn, for whose hospitality we are grateful. -
Putting Auction Theory to Work
Putting Auction Theory to Work Paul Milgrom With a Foreword by Evan Kwerel © 2003 “In Paul Milgrom's hands, auction theory has become the great culmination of game theory and economics of information. Here elegant mathematics meets practical applications and yields deep insights into the general theory of markets. Milgrom's book will be the definitive reference in auction theory for decades to come.” —Roger Myerson, W.C.Norby Professor of Economics, University of Chicago “Market design is one of the most exciting developments in contemporary economics and game theory, and who can resist a master class from one of the giants of the field?” —Alvin Roth, George Gund Professor of Economics and Business, Harvard University “Paul Milgrom has had an enormous influence on the most important recent application of auction theory for the same reason you will want to read this book – clarity of thought and expression.” —Evan Kwerel, Federal Communications Commission, from the Foreword For Robert Wilson Foreword to Putting Auction Theory to Work Paul Milgrom has had an enormous influence on the most important recent application of auction theory for the same reason you will want to read this book – clarity of thought and expression. In August 1993, President Clinton signed legislation granting the Federal Communications Commission the authority to auction spectrum licenses and requiring it to begin the first auction within a year. With no prior auction experience and a tight deadline, the normal bureaucratic behavior would have been to adopt a “tried and true” auction design. But in 1993 there was no tried and true method appropriate for the circumstances – multiple licenses with potentially highly interdependent values. -
Auction Theory Can Complement Competition Law: Preventing Collusion in Europe's 3G Spectrum Allocation
COMMENT AUCTION THEORY CAN COMPLEMENT COMPETITION LAW: PREVENTING COLLUSION IN EUROPE'S 3G SPECTRUM ALLOCATION OWEN M. KENDLER* 1. INTRODUCTION With the advent of wireless technology for personal and indi- vidualized communication,' radio frequencies have become valu- able property.2 European Union ("EU")3 member states will in- * J.D. Candidate 2002, University of Pennsylvania Law School; M.Sc. Eco- nomics 1999, University of Bristol; B.A. 1996, Washington University. The Author thanks Professor David Gerber of Kent College Law School and Alisa Greenstein of Paul, Weiss, Rifkind, Wharton & Garrison for their insightful comments. Ad- ditional thanks go to Professor Paul D. Klemperer of Nuffield College, Oxford University, for his help in locating key international materials. Jessica Miller of the Class of 2002 of the University of Pennsylvania Law School deserves special mention for all of her hard work in refining and improving this Comment 1 Although the popular press claims the current wireless revolution is a per- sonal communication revolution, radio spectrum in fact began its life as a medium for personal communication through ship-to-shore radio. See discussion infra note 18. The current wireless revolution reverts back to this two-way usage: the cur- rent revolution involves the targeting of wireless communications between two points and the ability for mass use of a narrow bandwidth by multiple users and services (e.g., voice, data, fax, and video). 2 Stephen Labaton, Clinton Orders a New Auction of the Airwaves, N.Y. TIMEs, Oct. 14, 2000, at Al. 3 The terminology used by European institutions is troublesome, because of changes in the name of Europe's confederation and the complexity of its founding and major treaties. -
Publishing Government Contracts Addressing Concerns and Easing Implementation
Publishing Government Contracts Addressing Concerns and Easing Implementation A Report of the Center for Global Development Working Group on Contract Publication Publishing Government Contracts Addressing Concerns and Easing Implementation A Report of the Center for Global Development Working Group on Contract Publication Publishing Government Contracts Addressing Concerns and Easing Implementation A Report of the Center for Global Development Working Group on Contract Publication © Center for Global Development. 2014. Some Rights Reserved. Creative Commons Attribution-NonCommercial 3.0 The Center for Global Development is grateful for contributions from the Omidyar Network and the UK Department for International Development in support of this work. Center for Global Development 2055 L Street NW, Fifth Floor Washington DC 20036 www.cgdev.org Contents Working Group on Contract Publication ................................................................v Preface ........................................................................................................................... vii Acknowledgements .....................................................................................................ix Summary and Recommendations of the Working Group ................................ix Benefits of Publication ........................................................................................................................ ix Addressing Concerns .......................................................................................................................... -
Plus Factors and Agreement in Antitrust Law†
Kovacic Final Type M.doc 11/17/2011 11:17 AM PLUS FACTORS AND AGREEMENT IN ANTITRUST LAW† William E. Kovacic* Robert C. Marshall** Leslie M. Marx*** Halbert L. White**** Plus factors are economic actions and outcomes, above and beyond paral- lel conduct by oligopolistic firms, that are largely inconsistent with unilateral conduct but largely consistent with explicitly coordinated action. Possible plus factors are typically enumerated without any attempt to dis- tinguish them in terms of a meaningful economic categorization or in terms of their probative strength for inferring collusion. In this Article, we provide a taxonomy for plus factors as well as a methodology for ranking plus factors in terms of their strength for inferring explicit collusion, the strongest of which are referred to as “super plus factors.” Table of Contents Introduction ...................................................................................... 394 I. Definition of Concerted Action in Antitrust Law....... 398 A. Doctrine Governing the Use of Circumstantial Evidence to Prove an Agreement ....................................... 399 B. Plaintiff’s Burden of Proof ................................................ 402 C. Interdependence and the Role of Plus Factors .................. 405 II. Agreements to Suppress Rivalry Assessed through the Reactions of Buyers ..................................................... 409 III. Taxonomy of Cartel Conduct ........................................... 413 † The authors are grateful to Charles Bates, Joe Harrington, -
Sensitivity of Equilibrium Behavior to Higher-Order Beliefs in Nice Games
Forthcoming in Games and Economic Behavior SENSITIVITY OF EQUILIBRIUM BEHAVIOR TO HIGHER-ORDER BELIEFS IN NICE GAMES JONATHAN WEINSTEIN AND MUHAMET YILDIZ Abstract. We consider “nice” games (where action spaces are compact in- tervals, utilities continuous and strictly concave in own action), which are used frequently in classical economic models. Without making any “richness” assump- tion, we characterize the sensitivity of any given Bayesian Nash equilibrium to higher-order beliefs. That is, for each type, we characterize the set of actions that can be played in equilibrium by some type whose lower-order beliefs are all as in the original type. We show that this set is given by a local version of interim correlated rationalizability. This allows us to characterize the robust predictions of a given model under arbitrary common knowledge restrictions. We apply our framework to a Cournot game with many players. There we show that we can never robustly rule out any production level below the monopoly production of each firm.Thisiseventrueifweassumecommonknowledgethat the payoffs are within an arbitrarily small neighborhood of a given value, and that the exact value is mutually known at an arbitrarily high order, and we fix any desired equilibrium. JEL Numbers: C72, C73. This paper is based on an earlier working paper, Weinstein and Yildiz (2004). We thank Daron Acemoglu, Pierpaolo Battigalli, Tilman Börgers, Glenn Ellison, Drew Fudenberg, Stephen Morris, an anonymous associate editor, two anonymous referees, and the seminar participants at various universities and conferences. We thank Institute for Advanced Study for their generous support and hospitality. Yildiz also thanks Princeton University and Cowles Foundation of Yale University for their generous support and hospitality. -
Auction Design and Tacit Collusion in FCC Spectrum Auctions
Auction Design and Tacit Collusion in FCC Spectrum Auctions Patrick Bajari and Jungwon Yeo October 19, 2008 Abstract The Federal Communications Commission (FCC) has used auctions to award spectrum since 1994. During this time period, the FCC has experimented with a variety of auctions rules including click box bidding and anonymous bidding. These rule changes make the actions of bidders less visible during the auction and also limit the set of bids which can be submitted by a bidder during a particular round. Economic theory suggests that tacit collusion may be more di¢ cult as a result. We examine this proposition using data from 4 auctions: the PCS C Block, Auction 35, the Advanced Wireless Service auction and the 700 Mhz auction. We examine the frequency of jump bids, retaliatory bids and straightforward bids across these auctions. While this simple descriptive exercise has a number of limitations, the data suggests that these rule changes did limit …rms ability to tacitly collude. Bajari: Univeristy of Minnesota and NBER, Yeo: Univeristy of Minnesota. Bajari would like to thank the National Science Foundation for generous research support. 1 1 Introduction Starting in 1994, the Federal Communications Commission (FCC) has used auctions to award spectrum. Prior to this time, the FCC used administrative hearings or lotteries to award licenses. Economic theory suggests that auctions should have a number of advantages over these earlier mechanisms. First, in many auction models, game theory predicts that the bidder which values the item most highly will win the auction. Therefore, the auction results in an e¢ cient allocation. -
Comments on the Above-Noted Consultation
Rogers Communications Inc. 333 Bloor Street East Toronto, Ontario M4W 1G9 Tel. (416) 935-7211 Fax (416) 935-7719 [email protected] Dawn Hunt Vice-President Regulatory July 15, 2009 Director, Spectrum Management Operations Radiocommunications and Broadcasting Regulatory Branch Industry Canada 300 Slater Street Ottawa ON K1A 0C8 Sent via email: [email protected] Re: Canada Gazette, Part I, April 11, 2009, Gazette Notice No. DGRB-001-09, Consultation on the Revisions to the Framework for Spectrum Auctions in Canada Rogers Communications Inc. (Rogers) appreciates the opportunity to provide reply comments on the above-noted consultation. The documents are being sent in Adobe Acrobat Professional Version 8.0. Operating System: Microsoft Windows XP. Yours very truly, Dawn Hunt Attach. WIRELESS DIGITAL CABLE INTERNET HOME PHONE VIDEO PUBLISHING BROADCASTING Reply Comments of Rogers Communications Inc. (Rogers) Canada Gazette Notice No. DGRB-001-09 Consultation on Revisions to the Framework for Spectrum Auctions in Canada Published in the Canada Gazette, Part I April 11, 2009 July 15, 2009 Rogers Communications Inc DGRB-001-09 July 15, 2009 Executive Summary Rogers Communications Inc. (“Rogers) provides the following reply to the submissions filed by other parties in response to Industry Canada’s Consultation on Revisions to the Framework for Spectrum Auctions in Canada (the “Consultation Paper”). In the Consultation Paper, the Department invited comments about spectrum management in Canada, including the use of auction types other than simultaneous multiple-round ascending (SMRA), the renewal of long-term licences, the research and development (R&D) condition of licence, and Tier areas for spectrum licensing. -
TOWARD a DIGITAL FUTURES FOUNDATION a Concept Note
April 2021 HOW TO CLOSE AMERICA'S DIGITAL EQUITY GAPS: TOWARD A DIGITAL FUTURES FOUNDATION A Concept Note Michael A. Calabrese & Lester M. Salamon A joint product of the Open Technology Institute at New America and the PtP Project PHILANTHROPICATION thru PRIVATIZATION PROJECT Calabrese and Salamon • How to Close America’s Digital Equity Gaps: Toward a Digital Futures Foundation • Page i Suggested Citation: Michael Calabrese and Lester M. Salamon, “How to Close America’s Digital Equity Gaps: Toward a Digital Futures Foundation,” A Concept Note. (Baltimore, MD: Johns Hopkins Center for Civil Society Studies and Washington, DC: New America, April 2021). Opinions expressed herein are solely the responsibility of the authors and may not necessarily be shared by New America, Johns Hopkins University, East-West Management Institute, or any other institutions with which the authors are associated, or that have supported their work. © Lester M. Salamon and Michael A. Calabrese, 2021 This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. Cover image adapted from rawpixel.com/Freepik Calabrese and Salamon • How to Close America’s Digital Equity Gaps: Toward a Digital Futures Foundation • Page ii TABLE OF CONTENTS INTRODUCTION 1 PART I 4 What is spectrum…and who owns it? PART II What is driving massive escalations 6 in the value of spectrum globally? PART III U.S. precedents for using proceeds from 8 the privatization of government assets PART IV The case for a private Digital Futures Foundation 11 financed by spectrum auction proceeds CONCLUSION 22 References 23 About the authors 25 bit.ly/PtP-Spectrum-Concept-Note Calabrese and Salamon • How to Close America’s Digital Equity Gaps: Toward a Digital Futures Foundation • Page 1 INTRODUCTION America’s digital ecosystem suffers from a serious set of imbalances. -
Sustainable and Unchallenged Algorithmic Tacit Collusion
Northwestern Journal of Technology and Intellectual Property Volume 17 Issue 2 Article 2 3-2020 SUSTAINABLE AND UNCHALLENGED ALGORITHMIC TACIT COLLUSION Ariel Ezrachi Oxford University Centre for Competition Law and Policy Maurice E. Stucke University of Tennessee College of Law Follow this and additional works at: https://scholarlycommons.law.northwestern.edu/njtip Recommended Citation Ariel Ezrachi and Maurice E. Stucke, SUSTAINABLE AND UNCHALLENGED ALGORITHMIC TACIT COLLUSION, 17 NW. J. TECH. & INTELL. PROP. 217 (2020). https://scholarlycommons.law.northwestern.edu/njtip/vol17/iss2/2 This Article is brought to you for free and open access by Northwestern Pritzker School of Law Scholarly Commons. It has been accepted for inclusion in Northwestern Journal of Technology and Intellectual Property by an authorized editor of Northwestern Pritzker School of Law Scholarly Commons. SUSTAINABLE AND UNCHALLENGED ALGORITHMIC TACIT COLLUSION Cover Page Footnote We are grateful for comments received from participants in the 2017 Organization for Economic Cooperation and Development [OECD] roundtable on “Algorithms and Collusion” and the 2018 Max Planck Round Table Discussion on Tacit Collusion. This article is available in Northwestern Journal of Technology and Intellectual Property: https://scholarlycommons.law.northwestern.edu/njtip/vol17/iss2/2 NORTHWESTERN JOURNAL OF TECHNOLOGY AND INTELLECTUAL PROPERTY SUSTAINABLE AND UNCHALLENGED ALGORITHMIC TACIT COLLUSION Ariel Ezrachi & Maurice E. Stucke March 2020 VOL. 17, NO. 2 © 2020 by Ariel Ezrachi & Maurice E. Stucke Copyright 2020 by Ariel Ezrachi & Maurice E. Stucke Volume 17, Number 2 (2020) Northwestern Journal of Technology and Intellectual Property SUSTAINABLE AND UNCHALLENGED ALGORITHMIC TACIT COLLUSION Ariel Ezrachi* & Maurice E. Stucke** ABSTRACT—Algorithmic collusion has the potential to transform future markets, leading to higher prices and consumer harm.