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Bidding Markets

Author

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  • Paul Klemperer

Abstract

The 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 behavior, 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.

Suggested Citation

  • Paul Klemperer, 2007. "Bidding Markets," Journal of Competition Law and Economics, Oxford University Press, vol. 3(1), pages 1-47.
    • Handle: RePEc:oup:jcomle:v:3:y:2007:i:1:p:1-47.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhl017
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    Cited by:

    1. Raventós, Pedro & Zolezzi, Sandro, 2015. "Electronic tendering of pharmaceuticals and medical devices in Chile," Journal of Business Research, Elsevier, vol. 68(12), pages 2569-2578.
    2. Vlad Mares & Mikhael Shor, 2013. "Information concentration in common value environments," Review of Economic Design, Springer;Society for Economic Design, vol. 17(3), pages 183-203, September.
    3. Zulehner, Christine & Gugler, Klaus Peter & Weichselbaumer, Michael, 2015. "Analysis of mergers in first-price auctions," CEPR Discussion Papers 10799, C.E.P.R. Discussion Papers.
    4. Rabindra Nepal & Tooraj Jamasb, 2011. "Market Integration, Efficiency, and Interconnectors: The Irish Single Electricity Market," Working Papers EPRG 1121, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    5. Nepal, Rabindra & Jamasb, Tooraj, 2012. "Interconnections and market integration in the Irish Single Electricity Market," Energy Policy, Elsevier, vol. 51(C), pages 425-434.
    6. Loyola, Gino, 2008. "On bidding markets: the role of competition," UC3M Working papers. Economics we083318, Universidad Carlos III de Madrid. Departamento de Economía.

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