Collusion seems to be the stronger force in auctions
https://insight.kellogg.northwestern.edu/article/going_going_wrong
https://en.wikipedia.org/wiki/Spectrum_auction
The Federal Communications Commission in the United States conducts auctions to sell the rights to transmit signal over specific bands of the electromagnetic spectrum. Having auctions to assign scarce resources has great benefits; resources are allocated to people who seem to value it the most, it’s less controversial and raises a great sum of money. However, evidence shows that prior knowledge about the items in the auction and participants might give rise to tacit collusive behavior among participants. To avoid this type of collusion, the FCC has made the bidding anonymous and is giving participants fewer chances to bid. Some people believe that anonymous bidding will increase competition and prevents firms from retaliatory actions. However, research suggests that FCC’s approach may still be ineffective in preventing collusion.
In the Kellogg School of Management study cited above, researchers create an experimental “collusion incubator” to study the auction dynamics. In this setting, they had eight items and participants were quick to collude and bid for different items, resulting in prices dropping dramatically. The researchers tried various approaches to make collusion more difficult, and while some approaches had an effect on how quickly participants colluded the impact on prices was small. In another experiment, the researchers tried to spur further competition by adding a surprise entry to the items in the auction. This approach was most effective and made convergence back to collusive equilibrium harder. The table below shows various methods that were tested to prevent collusion along with the results. The researchers conclude that once collusion is reached among firms it is hard to break it.
