Analysis of mergers in first-price auctions

Christine Zulehner, Klaus Gugler () and Michael Weichselbaumer

No 10799, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In this paper, we analyze mergers in bidding markets. We utilize data from procurement auctions in the Austrian construction sector and estimate models of first-price sealed-bid auctions. Based on estimated cost and markups, we run merger simulations and disentangle the market power effects from potential cost efficiencies. We analyze static and dynamic models of first price auctions, and compare the outcomes of the merger simulations with the actual effects of observed mergers. Our results show that market power and efficiency effects are present post merger, leading to increased markups, but leaving the winning bid essentially unaffected by the merger. We find a good correspondence of predicted and actual effects for full mergers, but not for majority acquisitions.

Keywords: Construction procurement; Evaluation of mergers; Independent private values; First-price auctions; Merger simulation (search for similar items in EconPapers)
JEL-codes: D44 L10 L13 (search for similar items in EconPapers)
Date: 2015-08
New Economics Papers: this item is included in nep-com and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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