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Bidding Markets

  • Paul Klemperer

    (Nuffield College, Oxford, UK)

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 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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File URL: http://econwpa.repec.org/eps/le/papers/0508/0508007.pdf
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Paper provided by EconWPA in its series Law and Economics with number 0508007.

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Length: 40 pages
Date of creation: 17 Aug 2005
Date of revision:
Handle: RePEc:wpa:wuwple:0508007
Note: Type of Document - pdf; pages: 40
Contact details of provider: Web page: http://econwpa.repec.org

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