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There's a lot of mechanisms that can be defeated through collusion of the participants. The trick is to think like a cunning participant and sniff out every wa

There's a lot of mechanisms that can be defeated through collusion of the participants. The trick is to think like a cunning participant and sniff out every way to make money out of the system. I recall the story of some similar spectrum auction (was it in Freakonomics?) where the participants were allowed to bid arbitrary $ amounts, and turned out they were encoding the geographic areas they wanted to buy in the last digits of their $ bids, and thus signaling to competitors to not compete and artificially hold down the price in those areas.

bvaldivielso 6y ago
Oh wow I'm curious about this. How is that better than communicating with the competitors directly?
- chiph 6y ago
  Direct communication would have been easily provable collusion. This way they could use the excuse "Our math guys came up with that offer price based on complex financial calculations. Total coincidence that the last part of the number happens to look like a zipcode."
  - supernova87a 6y ago
    Yeah, it's the difference between: "Your honor, as part of the settlement we admit to speaking with our auction competitor to agree not to outbid each other by a geographically arranged scheme, in violation of the rules of the auction" versus: "Huh, our team loves to do funny things with numbers and has this habit of putting our area code in the last several digits of any bid for our record keeping purposes. Every time we did it, we won the auction, so we kept on doing it as a good luck charm!"
- paulgb 6y ago
  Here's a paper on it: http://www.cramton.umd.edu/papers2000-2004/00jre-collusive-bidding-lessons.pdf http://www.cramton.umd.edu/papers2000-2004/00jre-collusive-b... Here's an FCC write-up of one of the more egregious cases, where the participant was fined $650k https://wireless.fcc.gov/auctions/anticollusion/releases/FCC-98-203.pdf https://wireless.fcc.gov/auctions/anticollusion/releases/FCC... To answer your question, I believe they weren't allowed to communicate.

bvaldivielso 6y ago

Oh wow I'm curious about this. How is that better than communicating with the competitors directly?

chiph 6y ago
Direct communication would have been easily provable collusion. This way they could use the excuse "Our math guys came up with that offer price based on complex financial calculations. Total coincidence that the last part of the number happens to look like a zipcode."
- supernova87a 6y ago
  Yeah, it's the difference between: "Your honor, as part of the settlement we admit to speaking with our auction competitor to agree not to outbid each other by a geographically arranged scheme, in violation of the rules of the auction" versus: "Huh, our team loves to do funny things with numbers and has this habit of putting our area code in the last several digits of any bid for our record keeping purposes. Every time we did it, we won the auction, so we kept on doing it as a good luck charm!"
paulgb 6y ago
Here's a paper on it: http://www.cramton.umd.edu/papers2000-2004/00jre-collusive-bidding-lessons.pdf http://www.cramton.umd.edu/papers2000-2004/00jre-collusive-b... Here's an FCC write-up of one of the more egregious cases, where the participant was fined $650k https://wireless.fcc.gov/auctions/anticollusion/releases/FCC-98-203.pdf https://wireless.fcc.gov/auctions/anticollusion/releases/FCC... To answer your question, I believe they weren't allowed to communicate.