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Mergers, concurrent marketing mechanisms and the performance of sequential auctions

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  • Jeddy, Mohamed
  • Larue, Bruno
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    Abstract

    We analyze the effects of mergers and the introduction of concurrent marketing mechanisms on the seller’s revenue, price trend and efficiency in sequential auctions under complete information with asymmetric bidders. First, we provide conditions for bidders to be strategic when the number of objects is less or greater than the number of bidders as this impacts upon the set of possible mergers. Second, we show that mergers may simultaneously increase the seller’s revenue and improve efficiency. Third, we show that having a marketing mechanism working alongside the auction can increase or decrease the average auction price. We use weekly data about Quebec’s daily hog auction to ascertain the effects of a merger and of changes in the weights of concurrent marketing mechanisms on daily auction prices. Our empirical analysis relies on an endogenous structural change test which detected three breaks corresponding to: i) the introduction of a new concurrent mechanism, ii) a joint-venture partnership of the two largest hog processing firms and iii) an announcement by Canada’s Competition Bureau authorizing the full merger of the same two firms.

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    Bibliographic Info

    Paper provided by Structure and Performance of Agriculture and Agri-products Industry (SPAA) in its series Working Papers with number 126945.

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    Date of creation: Feb 2012
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    Handle: RePEc:ags:spaawp:126945

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    Web page: http://servsas.fsaa.ulaval.ca/index.php?id=12482&L=1

    Related research

    Keywords: Multi-unit sequential auctions; mergers; concurrent marketing mechanisms; endogenous structural changes; Industrial Organization; Institutional and Behavioral Economics; Livestock Production/Industries; D4; L7;

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    1. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-94, March.
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    9. Mohamed Jeddy & Bruno Larue & Jean-philippe Gervais, 2010. "Allocations and Price Trends in Sequential Auctions under Complete Information with Symmetric Bidders," Economics Bulletin, AccessEcon, vol. 30(1), pages 429-436.
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    24. Steven Heubeck & Donald J. Smythe & Jingang Zhao, 2006. "A Note on the Welfare Effects of Horizontal Mergers in Asymmetric Linear Oligopolies," Annals of Economics and Finance, Society for AEF, vol. 7(1), pages 29-47, May.
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