AbstractThe existence of a ‘bidding market’ is commonly cited as a reason to tolerate the creation or maintenance of highly concentrated markets. We discuss three erroneous arguments to that effect: the ‘consultants’ fallacy’ that ‘market power is impossible’, the ‘academics’ fallacy’ that (often) ‘market power does not matter’, and the ‘regulators’ fallacy’ that ‘intervention against pernicious market power is unnecessary’, in markets characterized by auctions or bidding processes. Furthermore we argue that the term ‘bidding market’ as it is widely used in antitrust is unhelpful or misleading. Auctions and bidding processes do have some special features—including their price formation processes, common-values behaviour, and bid-taker power—but the significance of these features has been overemphasized, and they often imply a need for stricter rather than more lenient competition policy.
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Bibliographic InfoPaper provided by EconWPA in its series Law and Economics with number 0508007.
Length: 40 pages
Date of creation: 17 Aug 2005
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Note: Type of Document - pdf; pages: 40
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Bidding Markets; Auctions; Antitrust; Competition Policy; Bidding; Market Power; Private Values; Common Values; Anti-trust;
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- Gino Loyola, 2008. "On bidding markets: the role of competition," Economics Working Papers we083318, Universidad Carlos III, Departamento de Economía.
- Vlad Mares & Mikhael Shor, 2013. "Information concentration in common value environments," Review of Economic Design, Springer, vol. 17(3), pages 183-203, September.
- Nepal, R. & Jamasb, T., 2011. "Market Integration, Efficiency, and Interconnectors: The Irish Single Electricity Market," Cambridge Working Papers in Economics 1144, Faculty of Economics, University of Cambridge.
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