A Model of Collusion Formation and Measurement in the Open Ascending Bid Auctions in Agricultural Commodity Markets

Abstract

This paper derives a method of measuring the degree of collusion among the bidders in agricultural commodity markets in India and derives the distribution of the change in equilibrium bid prices with respect to time in open ascending price auction when the cartel is there. The important assumption is the bidding is repetitive with a set of common bidders. The theory has been derived based on the behavior of the wholesale market of agricultural commodities in India. This means the paper is based on full information model in the collusion formation. The paper first derives the theoretical structure of the bidders' behavior and thereafter derives a measure of collusion formation.