ON RING FORMATION IN AUCTIONS

It is assumed that first ring members bid in a preauction or knockout and that then only the ring's representative actively bids in the subs equent main auction. The rules must specify for every vector of bids w ho represents the cartel in the main auction, which transfers are paid to other ring members, who wins the main auction, and finally which p rice has to be paid. Most of the rules can be derived instead of being imposed by requiring envy-free net trades with respect to bids. Altho ugh they could be uniquely determined by an additional incentive const raint, we try to find out for all envy-free auction mechanisms whether they are profitable, i.e. every type of every cartel member gains fro m ring formation, and coalition proof. The case when the ring represen tative has to repeat his preauction bid in the main auction is analyse d in more detail than the case when these two bids are independent.