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Historical Knockout Auctions

Summary:
The Journal of Political Economy, one of the more prestigious economics journals, gets submissions of interesting economics related anecdotes for its back cover. The most recent issue contained this:Collusive Bidding and Intermediary Profits in Congo a Hundred Years AgoFive traders, who have hurried up in their cars, were waiting for the market to open. The region here has not been conceded; the market is free and the bidding began at once. We were surprised to see it stop almost immediately. But soon we understood that these five gentlemen were making a ring. The first carried off the whole crop for seven francs fifty a kilo, which probably seems a very fair price to the native, who only recently was selling his rubber at three francs; but at Kinshassa, where the traders resell

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The Journal of Political Economy, one of the more prestigious economics journals, gets submissions of interesting economics related anecdotes for its back cover. The most recent issue contained this:

Collusive Bidding and Intermediary Profits in Congo a Hundred Years Ago

Five traders, who have hurried up in their cars, were waiting for the market to open. The region here has not been conceded; the market is free and the bidding began at once. We were surprised to see it stop almost immediately. But soon we understood that these five gentlemen were making a ring. The first carried off the whole crop for seven francs fifty a kilo, which probably seems a very fair price to the native, who only recently was selling his rubber at three francs; but at Kinshassa, where the traders resell it, it has fetched for some time past between thirty and forty francs, which leaves a very respectable margin. What about our gentlemen? As soon as the business is concluded with the native, they meet together privately in a little room, where another auction begins and they divide the spoil among them. The administrator is powerless against this secret auction, which, with every appearance of being illicit, does not, I am told, come within the power of the law.

[Andre Gide, Travels in the Congo (1927), translated by Dorothy Bussy (Hopewell, NJ: Ecco, 1994), p. 45. See also Daniel Graham and Robert Marshall, “Collusive Bidder Behavior at Single-Object Second-Price and English Auctions,” J.P.E., vol. 95, no. 6 (December 1987), 1217–39]

(Suggested by Laurent Lamy)

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