Auction Size and Collusion

This paper analyzes the consequences of the size of an auction, in terms of the volume of product and the time lenght covered by the auctioned contract, on the incentive bidders have to collude. The paper shows that the recommendation to increase as much as possible the auction size in order to prevent bidders from colluding, found in several policy papers, is valid only in some exceptional circumstances. In many cases increasing the auction size may induce bidders to form a cartel that would not have been existed otherwise.