Collusion via Signaling in Multiple Object Auctions with Complementarities: An Experimental Test

Authors: Anthony M. Kwasnica and Katerina Sherstyuk

We experimentally study tacit bidder collusion in open ascending auctions for two heterogeneous objects in environments with or without complementarities. While lowprice collusive equilibria have been shown to exist under such institutions in theory, they require sophisticated tacit coordination among bidders that may be difficult to achieve in practice. We provide the first systematic evidence of successful bidder collusion in such complex environments. Stable collusion is often observed in markets with or without complementarities, as long as the number of bidders is small. We further find that bidder choice of collusive strategies is sensitive to the presence of complementarities.

While bidders make extensive use of signaling in no complementarity environments, in the presence of complementarities, they often adopt higher-payff bid rotation strategies that are supported only by repeated play. Retaliatory bidding is widely used to punish non-collusive behavior of others.