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The Effects of Mergers in Open Auction Markets

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Author Info
Keith Waehrer () (U.S. Department of Justice)
Martin Perry () (Rutgers University)

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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 still reduces the buyer's welfare because there is an increased probability of internal production at a higher cost. 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.

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Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 200203.

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Date of creation: 04 Apr 2002
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Handle: RePEc:rut:rutres:200203

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Related research
Keywords: auctions mergers

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Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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, vol. 21(1), pages 87-105, February. [Downloadable!] (restricted)
  2. Mailath, George J. & Zemsky, Peter, 1991. "Collusion in second price auctions with heterogeneous bidders," Games and Economic Behavior, Elsevier, vol. 3(4), pages 467-486, November. [Downloadable!] (restricted)
  3. Farrell, Joseph & Shapiro, Carl, 1990. "Horizontal Mergers: An Equilibrium Analysis," American Economic Review, American Economic Association, vol. 80(1), pages 107-26, March. [Downloadable!] (restricted)
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  4. Joseph Farrell & Carl Shapiro, 1990. "Asset Ownership and Market Structure in Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 275-292, Summer. [Downloadable!] (restricted)
  5. Roberto Burguet & Martin Perry, 2000. "Bribery and Favoritism by Auctioneers in Sealed Bid Auctions," Econometric Society World Congress 2000 Contributed Papers 1827, Econometric Society. [Downloadable!]
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Roberto Burguet & Martin Perry, 2007. "Bribery and Favoritism by Auctioneers in Sealed-Bid Auctions," Contributions to Theoretical Economics, Berkeley Electronic Press, vol. 7(1), pages 1219-1219. [Downloadable!] (restricted)
    Other versions:
  2. Martin K Perry & Jozsef Sakovics, 2004. "Auctions for Split-Award Contracts," ESE Discussion Papers 90, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
    Other versions:
  3. Steven Tschantz, Philip Crooke, Luke Froeb, 2000. "Mergers in Sealed versus Oral Auctions," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 7(2), pages 201-212, July. [Downloadable!] (restricted)
  4. Gino Loyola, 2008. "On bidding markets: the role of competition," Economics Working Papers we083318, Universidad Carlos III, Departamento de Economía. [Downloadable!]
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