Collusion refers to bidders communicating with each other without the knowledge of the auctioneer in order to obtain an An auction is a market mechanism with the aims of allocating... More outcome more favourable to them. While explicit collusion is commonly prohibited by law, it can be observed in real-world applications that bidders succeed to circumvent the law by implicit collusion, i.e. by communicating via hidden clues.
A famous example of implicit collusion is the An auction is a market mechanism with the aims of allocating... More for telecommunication licenses in Germany in 1999, where bidders succeeded to communicate via number combinations in their bids: “Vodafone–Mannesman ended a number of its bids with the digit “6” which, it was thought, was a signal that its preference was to end the An auction is a market mechanism with the aims of allocating... More quickly with six remaining bidders.”
Klemperer, P., 2002a: How (not) to run auctions: The European 3G telecom auctions. European Economic Review 46, pp. 829-845.
Klemperer, P., 2002b: What really matters in An auction is a market mechanism with the aims of allocating... More design. Journal of Economic Perspectives, Vol. 16, No. 1, pp. 169-189.