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We develop a method for detecting cartels in multistage auctions. Our approach
allows firms to act collusively against cartel members yet competitively otherwise. In
these auctions, bidders submit initial bids and can later revise them downward. As initial
bids are shaded, close initial bids indicate similar costs and thus create strong incentives
to undercut rivals. We classify firm pairs as collusive if they ignore this incentive by
failing to update bids against each other, relative to other pairs with similarly close
initial bids. Our algorithm predicts Ukraine’s Antimonopoly Committee sanctions:
classified pairs are nine times more likely to be sanctioned.
