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Integrating the Structural Auction Approach and Traditional Measures of Market Power

  • Tostao, Emilio
  • Chung, Chanjin
  • Brorsen, B. Wade

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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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
Date of revision:
Handle: RePEc:ags:aaea06:21244
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  12. Jean-Marc Bourgeon & Yves Le Roux, 2001. "Traders' Bidding Strategies on European Grain Export Refunds: An Analysis with Affiliated Signals," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 563-575.
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  18. Ward, Clement E., 2002. "A Review of Causes for and Consequences of Economic Concentration in the U.S. Meatpacking Industry," CAFRI: Current Agriculture, Food and Resource Issues, Canadian Agricultural Economics Society, issue 03.
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