The Effects of Mergers in Open-Auction Markets
Keith Waehrer () and
Martin K Perry
RAND Journal of Economics, 2003, vol. 34, issue 2, 287-304
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 always reduces the buyer's welfare. 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. Copyright 2003 by the RAND Corporation.
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Working Paper: The Effects of Mergers in Open Auction Markets (2002)
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