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Integrating the Structural Auction Approach and Traditional Measures of Market Power

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Author Info
Tostao, Emilio
Chung, Chanjin
Brorsen, B. Wade

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Abstract

This study asks the question, what is the relationship between traditional models of market power and structural auction models? An encompassing model is derived that considers both price markdowns due to bid shading during an auction and price markdowns at the industry-level due to imperfect competition. Data from a cattle procurement experimental market is used to compare the appropriateness of the two alternative theories. Regression results show that while the number of firms is more important than the number of bidders on lot of cattle in explaining pricing behavior in the game, the number of bidders does contain some unique information and should be included in the model. Both the traditional NEIO and structural auction approaches overestimated the true markdowns possibly due to failure to account for the winner's curse.

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Publisher Info
Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2006 Annual meeting, July 23-26, Long Beach, CA with number 21244.

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Date of creation: 2006
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Handle: RePEc:ags:aaea06:21244

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Keywords: Marketing;

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    Other versions:
  2. Rigoberto Lopez & Azzeddine Azzam & Carmen Lirón-España, 2002. "Market Power and/or Efficiency: A Structural Approach," Review of Industrial Organization, Springer, vol. 20(2), pages 115-126, March. [Downloadable!] (restricted)
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    Other versions:
  4. Paarsch, Harry J., 1992. "Deciding between the common and private value paradigms in empirical models of auctions," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 191-215. [Downloadable!] (restricted)
    Other versions:
  5. Schroeter, John R, 1988. "Estimating the Degree of Market Power in the Beef Packing Industry," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 158-62, February. [Downloadable!] (restricted)
    Other versions:
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    Other versions:
  12. John DiNardo & Justin L. Tobias, 2001. "Nonparametric Density and Regression Estimation," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 11-28, Fall. [Downloadable!] (restricted)
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    Other versions:
    • McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
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  22. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September. [Downloadable!] (restricted)
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    Other versions:
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