Identity-Compatible Auctions

Abstract

This paper studies sellers' and buyers' incentives to engage in shill bidding in single-object auctions. An auction is seller identity-compatible if the seller cannot profit by posing as one or more bidders through fictitious identities, and buyer identity-compatible if no buyer can profit by posing as multiple bidders. We distinguish lit auctions, which reveal the number of bidders, from dark auctions, which conceal it. Our results highlight the importance of concealing the number of bidders in deterring shill bidding: no optimal lit auction can achieve our design goal, whereas the dark first-price auction uniquely does.