Mergers in Sealed versus Oral Auctions

Steven Tschantz, Philip Crooke and Luke Froeb

International Journal of the Economics of Business, 2000, vol. 7, issue 2, 201-212

Abstract: In this paper, we study mergers in oral or second-price auctions and compare them to mergers in sealed-bid or first-price auctions. We use an adaptation of the logit qualitative choice model to characterize the underlying bidder value distributions. In second-price auctions, this model has a closed-form relationship between winning bids (prices) and the probabilities of winning (shares), and this relationship gives rise to a Herfindahl-like formula that predicts merger effects. We compare mergers in second-price auctions to mergers in first-price auctions. Despite their differences, sealed-bid merger effects are predicted by the oral Herfindahl-like formula.The source of this curious similarity is not apparent.

Keywords: Auction; Merger (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (12)

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DOI: 10.1080/13571510050084532

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