When Fewer Bids Increase Competition: Buyer Surplus Enhancing Mergers in Single-Award Procurement Auctions

Gian Luigi Albano (), Walter Ferrarese () and Roberto Pezzuto ()
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Gian Luigi Albano: Consip S.p.A. and LUISS Guido Carli University
Walter Ferrarese: Universitat de les Illes Balears
Roberto Pezzuto: DEF, University of Rome "Tor Vergata", http://www.ceistorvergata.it

No 607, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: We show that in a single-lot low-price auction, a merger can be simultaneously profitable and increase the buyer’s surplus, even in the absence of cost synergies. Thus the buyer’s purchasing price may go down even when a lower number of bids is submitted. In determining our main result we highlight the role of firms’ cost exhibiting a discontinuity due to short-term capacity constraints or non-linear contractual agreements. The paper contributes to a new strand of literature showing that in bidding markets the lack of merger-induced synergies does not necessarily imply worse outcomes for the buyer. Hence the Authorities need not worry about resorting to possibly convoluted assessment of the attainability of this kind of efficiencies.

Keywords: Horizontal Mergers; Buyer Surplus; Cost Discontinuity (search for similar items in EconPapers)
JEL-codes: L11 L23 L51 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2025-07-09, Revised 2025-07-09
New Economics Papers: this item is included in nep-com, nep-des and nep-mic
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