Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/235391 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9021
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
We analyze strategic leaks due to spying out a rival’s bid in a first-price auction. Such leaks induce sequential bidding, complicated by the fact that the spy may be a counterspy who serves the interests of the spied at bidder and reports strategically distorted information. This ambiguity about the type of spy gives rise to a non-standard signaling problem where both sender and receiver of messages have private information and the sender has a chance to make an unobserved move. Whereas spying without counterspy exclusively benefits the spying bidder, the potential presence of a counterspy yields a collusive outcome, even if the likelihood that the spy is a counterspy is arbitrarily small. That collusive impact shows up in all equilibria and is strongest in the unique pooling equilibrium which is also the payoff dominant equilibrium.
Subjects: 
auctions
tacit collusion
espionage
second-mover advantage
signaling
incomplete information
JEL: 
L12
L13
L41
D43
D44
D82
Document Type: 
Working Paper
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