Businesses don't even need to break the law. If a few companies are competing for a customer's business, they could tacitly agree that it's in their mutual interest to charge the same high price and share the business. If one supplier defected from the group by dropping its price, its rivals could punish it by dropping their own prices. Auction experts are divided over which mechanism works best. Monitor's Chakravorti favors ascending-price auctions, a la eBay, because they provide the most information about bidders' feelings.
People tend to underbid when they're afraid of winner's curse.
They will bid more freely if they can see that other bidders are also in the game, Chakravorti says. Oxford's Klemperer argues the opposite. If bids are sealed, a heavyweight couldn't scare off other bidders, so it would have to bid high or risk losing, he says. True, Chakravorti says. But there are other ways to minimize the drawbacks of an ascending-price auction.