The Effects of Mergers in Open Auction Markets

Keith Waehrer () and Martin Perry ()
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Martin Perry: Rutgers University

Departmental Working Papers from Rutgers University, Department of Economics

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.

Keywords: auctions; mergers (search for similar items in EconPapers)
JEL-codes: D44 L13 L41 (search for similar items in EconPapers)
Date: 2002-04-04
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Citations: View citations in EconPapers (2)

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Journal Article: The Effects of Mergers in Open-Auction Markets (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:rut:rutres:200203

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