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The Effects of Mergers in Open-Auction Markets

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  • Waehrer, Keith
  • Perry, Martin K

Abstract

The buyer solicits bids from suppliers with different cost distributions defined by their capacities. The expected market share of each supplier is the ratio of its capacity to the industry capacity. The buyer's optimal reserve price declines with increases in the concentration of the industry. The lower reserve price can partially or fully offset the price effects of a merger. However, a merger always reduces the buyer's welfare. The lower reserve price can also undermine the incentive for larger suppliers to merge and result in stable industry structures for which no further mergers would be profitable. Copyright 2003 by the RAND Corporation.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 34 (2003)
Issue (Month): 2 (Summer)
Pages: 287-304

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Handle: RePEc:rje:randje:v:34:y:2003:i:2:p:287-304

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  1. Lance Brannman & Luke M. Froeb, 2000. "Mergers, Cartels, Set-Asides, and Bidding Preferences in Asymmetric Oral Auctions," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 82(2), pages 283-290, May.
  2. Sen, Amartya, 1997. "On Economic Inequality," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198292975, October.
  3. Mailath, George J. & Zemsky, Peter, 1991. "Collusion in second price auctions with heterogeneous bidders," Games and Economic Behavior, Elsevier, Elsevier, vol. 3(4), pages 467-486, November.
  4. Encaoua, David & Jacquemin, Alexis, 1980. "Degree of Monopoly, Indices of Concentration and Threat of Entry," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 87-105, February.
  5. Joseph Farrell and Carl Shapiro., 1988. "Horizontal Mergers: An Equilibrium Analysis," Economics Working Papers, University of California at Berkeley 8880, University of California at Berkeley.
  6. Joseph Farrell & Carl Shapiro, 1990. "Asset Ownership and Market Structure in Oligopoly," RAND Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 21(2), pages 275-292, Summer.
  7. Roberto Burguet & Martin Perry, 2002. "Bribery and Favoritism by Auctioneers in Sealed Bid Auctions," Departmental Working Papers, Rutgers University, Department of Economics 200205, Rutgers University, Department of Economics.
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Citations

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Cited by:
  1. Maarten Janssen & Vladimir Karamychev, 2013. "Mergers in Bidding Markets," Tinbergen Institute Discussion Papers, Tinbergen Institute 13-012/VII, Tinbergen Institute.
  2. Kaplow, Louis & Shapiro, Carl, 2007. "Antitrust," Competition Policy Center, Working Paper Series, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley qt9pt7p9bm, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  3. Kai Konrad, 2012. "Information alliances in contests with budget limits," Public Choice, Springer, Springer, vol. 151(3), pages 679-693, June.
  4. Burguet Roberto & Perry Martin K, 2007. "Bribery and Favoritism by Auctioneers in Sealed-Bid Auctions," The B.E. Journal of Theoretical Economics, De Gruyter, De Gruyter, vol. 7(1), pages 1-27, June.
  5. Jeddy, Mohamed & Larue, Bruno, 2012. "Mergers, concurrent marketing mechanisms and the performance of sequential auctions," Working Papers, Structure and Performance of Agriculture and Agri-products Industry (SPAA) 126945, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
  6. Maarten Janssen & Vladimir Karamychev, 2013. "Mergers in Bidding Markets," Tinbergen Institute Discussion Papers, Tinbergen Institute 13-012/VII, Tinbergen Institute.
  7. Charles J. Thomas & Bart J. Wilson, 2008. "Horizontal Product Differentiation in Auctions and Multilateral Negotiations," Working Papers, Chapman University, Economic Science Institute 08-03, Chapman University, Economic Science Institute.
  8. Huck, S. & Konrad, K.A. & Müller, W., 2005. "Merger Without Costs Advantage," Discussion Paper, Tilburg University, Tilburg Law and Economic Center 2005-019, Tilburg University, Tilburg Law and Economic Center.
  9. Vlad Mares & Mikhael Shor, 2008. "Information Concentration in Common Value Environments," Working papers, University of Connecticut, Department of Economics 2012-23, University of Connecticut, Department of Economics.
  10. Vlad Mares & Mikhael Shor, 2013. "Information concentration in common value environments," Review of Economic Design, Springer, Springer, vol. 17(3), pages 183-203, September.
  11. Steven Tschantz & Philip Crooke & Luke Froeb, 2000. "Mergers in Sealed versus Oral Auctions," International Journal of the Economics of Business, Taylor & Francis Journals, Taylor & Francis Journals, vol. 7(2), pages 201-212.
  12. Alexander Raskovich, 2006. "Ordered Bargaining," EAG Discussions Papers, Department of Justice, Antitrust Division 200610, Department of Justice, Antitrust Division.
  13. Roberto Burguet & Martin K. Perry, 2003. "Preferred Suppliers and Vertical Integration in Auction Market," Working Papers, Barcelona Graduate School of Economics 74, Barcelona Graduate School of Economics.

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