TL;DR
This paper analyzes how auction design affects incentives for sellers and buyers to use fake identities, emphasizing the importance of concealment in auction mechanisms to prevent manipulation.
Contribution
It characterizes the identity compatibility of classic auction formats and highlights the role of information concealment in enabling optimal, manipulation-resistant auction outcomes.
Findings
Dark first-price auction with reserve is ex-post seller identity-compatible.
Lit auctions reveal bidder count, making them less manipulation-resistant.
Concealing bidder information broadens feasible, manipulation-resistant auction rules.
Abstract
This paper studies the incentives of the seller and buyers to shill bid in a single-item auction. An auction is seller identity-compatible if the seller cannot profit from pretending to be one or more bidders via fake identities. It is buyer identity-compatible if no buyer profits from posing as more than one bidder. Lit auctions reveal the number of bidders, whereas dark auctions conceal the information. We characterize three classic selling mechanisms -- first-price, second-price, and posted-price -- based on identity compatibility. We show the importance of concealing the number of bidders, which enables the implementation of a broader range of outcome rules. In particular, no optimal lit auction is ex-post seller identity-compatible, while the dark first-price auction (with reserve) achieves the goal.
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Taxonomy
TopicsAuction Theory and Applications · Consumer Market Behavior and Pricing · Game Theory and Applications