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Lessons from a Failed Airline Auction

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Author Info
J. Patrick Meister
Kyle J. Anderson
Abstract

In 1995, USAir placed itself for sale in an English auction. Interestingly, no bids were placed. This does not imply that the available firm is not a valuable acquisition. If losing reduces profits, firms wish to avoid a profit-reducing bidding war. However, in a sealed-bid auction (with no credible nonparticipation commitments), firms place profit-reducing bids in equilibrium. Also, a novelty of our analysis is the specification of the loser's profit rising with the price that the winner pays. This highlights an important explanation of bidding wars because a firm may bid simply to make the eventual winner pay a higher price. (JEL L1, L9) Copyright 2006, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/ei/cbj013
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Publisher Info
Article provided by Oxford University Press in its journal Economic Inquiry.

Volume (Year): 44 (2006)
Issue (Month): 2 (April)
Pages: 311-317
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Handle: RePEc:oup:ecinqu:v:44:y:2006:i:2:p:311-317

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Find related papers by JEL classification:
L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

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This page was last updated on 2009-11-19.

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