Bidding Clubs in First-Price Auctions

Abstract

We introduce a class of mechanisms, called bidding clubs, that allow agents to coordinate their bidding in auctions. Bidding clubs invite a set of agents to join, and each invited agent freely chooses whether to accept the invitation or whether to participate independently in the auction. Clubs first conduct a pre-auction; depending on the outcome of the pre-auction some subset of the members of the club bid in the primary auction in a prescribed way. We model this setting as a Bayesian game, including agents' choices of whether or not to accept a bidding club's invitation. We examine the specific case of bidding clubs for first-price auctions, showing the existence of a Bayes-Nash equilibrium where agents choose to participate in bidding clubs when invited and truthfully declare their valuations to the coordinator. Furthermore, we show that the existence of bidding clubs benefits all agents, including those who do not belong to a bidding club.