Shill Bidding in English Auctions (Research Seminar, November 8th, 2001) Andrew B. Whinston Hugh Cullen Chair Professor of Information Systems, Economics and Computer Science University of Texas, Austin Abstract Shill bidding in an English auction is the deliberate placing of bids on the seller's behalf to artificially drive up the price of his auctioned item. Shill bidding has been known to occur in auctions of high-value items like art and antiques where bidders' valuations differ and the seller's payoff from fraud is high. We prove that private-value English auctions will shill bidding can result in a higher expected seller profit than first and second-price sealed-bid auctions. To deter shill bidding we introduce a mechanism that makes shill bidding unprofitable. The mechanism emphasizes the role of an auctioneer who charges the seller a commission fee based on the difference between the winner's bid and the seller's reserve price. We demonstrate how this mechanism works and analyze the seller's optimal strategy.