Abstract

http://ssrn.com/abstract=69415
 
 

References (19)



 
 

Citations (6)



 


 



Mergers Among Asymmetric Bidders: A Logit Second-Price Auction Model


Luke Froeb


Vanderbilt University - Strategy and Business Economics

Steven Tschantz


Vanderbilt University - Department of Mathematics

Philip Crooke


Vanderbilt University - Department of Mathematics

February 27, 1998


Abstract:     
In this paper, we derive estimators of, and closed-form (non-integral) expressions for, the distribution of bids in an extreme value, asymmetric, second-price, private-values auction. In equilibrium, prices (winning bids) and shares (winning probabilities) have a simple monotonic relationship--higher-value firms win more frequently and at better prices than lower-value firms. Since the extreme value distribution is closed under the maximum function, the value of the merged coalition also has an extreme value distribution and thus lies on the same price/share curve. Consequently, merger price effects can be computed as a movement along the price/share curve, from the average pre-merger share to the post-merger aggregate share. The parameter determining how much winning prices change is the standard deviation of the extreme value component. Merger efficiency claims can be benchmarked against the marginal cost reductions necessary to offset merger price effects.

Number of Pages in PDF File: 17

JEL Classification: C25, D44, L41

working papers series


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Date posted: March 22, 1998  

Suggested Citation

Froeb, Luke and Tschantz, Steven and Crooke, Philip, Mergers Among Asymmetric Bidders: A Logit Second-Price Auction Model (February 27, 1998). Available at SSRN: http://ssrn.com/abstract=69415 or http://dx.doi.org/10.2139/ssrn.69415

Contact Information

Luke M. Froeb (Contact Author)
Vanderbilt University - Strategy and Business Economics ( email )
Nashville, TN 37203
United States
615-322-9057 (Phone)
615-343-7177 (Fax)

Steven T. Tschantz
Vanderbilt University - Department of Mathematics ( email )
Nashville, TN 37240
United States
Philip Crooke
Vanderbilt University - Department of Mathematics ( email )
Nashville, TN 37240
United States
615-322-6671 (Phone)
615-322-0215 (Fax)
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