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They are vulnerable to collusion in the sense that if all partys collude to decide who is going to win, then the winner bids X and the losers never put in a bid
by Veserv 3y ago
They are vulnerable to collusion in the sense that if all partys collude to decide who is going to win, then the winner bids X and the losers never put in a bid, so the pre-determined winner pays $0. In that sense, literally every auction is vulnerable to collusion. The only net downside to the Vickrey auction is that the winner still wins even if there is a defector, they would just pay more. This is in contrast to say a normal first-price auction where the winner values at $100 and the losers value at $99, so they collude to have the winner bid $1 and the colluders bid $0, but then there is a incentive for the colluders to defect and pay $2 to get the thing they value at $99. So, vulnerable to collusion in this sense is more that it is vulnerable to collusion with little to no risk of defection. However, if there are non-colluders, then the best you get is the highest bid of the non-colluders.