Collusion or Sniping in Simultaneous Ascending Auctions: A Prisoner's Dilemma

In simultaneous ascending price auctions with heterogeneous goods Brusco and Lopomo [2002] derive collusive equilibria, where bidders divide objects among themselves, while keeping the prices low. Considering a simultaneous ascending price auction with a fixed deadline, i.e. the hard close auction format, a prisoner's dilemma situation results and collusive equilibria do not longer exist, even for only two bidders. Hence, we introduce a further reason for sniping behaviour in Hard Close auctions, i.e. to appear to collude early in the auction and to defect at the very last moment.