Work

The Effects of Mergers in Open-Auction Markets

Year: 2003

Type: article

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.

Source: The RAND Journal of Economics

DOI: 10.2307/1593718

Authors: Keith Waehrer, Martin K. Perry

Institutions: United States Department of Justice, Rutgers, The State University of New Jersey

Language: English

Topic: Auction Theory and Applications

Subfield: Management Science and Operations Research

Field: Decision Sciences

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W3122042011

FWCI: 5.033

Cites: 26

Cited by: 69

Related to: 10