McAfee and McMillan (1992) investigate the coordinated biding strategies in a strongcartel, in which the cartel members can exclude new entrants and can make transfer payments,and show that the strong cartel mechanism is incentive-compatible and efficient. Inthis paper however, we show the strong cartel mechanism is no longer ratifiable in the presenceof participation cost, in which case the bidder with the highest value in the cartel wouldhave incentive to veto for the collusive mechanism. This behavior could make the maximumbenefit for the winning bidder.
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