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Competition Policy in Auctions and 'Bidding Markets'

HANDBOOK OF ANTITRUST ECONOMICS, P. Buccirossi, ed., MIT Press, Forthcoming

60 Pages Posted: 11 Apr 2008  

Paul Klemperer

University of Oxford - Department of Economics; Centre for Economic Policy Research (CEPR)

Abstract

The existence of a "bidding market" is commonly cited as a reason to tolerate the creation or maintenance of highly concentrated markets. We discuss three erroneous arguments to that effect: the "consultants' fallacy" that "market power is impossible", the "academics' fallacy" that (often) "market power does not matter", and the "regulators' fallacy" that "intervention against pernicious market power is unnecessary", in markets characterised by auctions or bidding processes.

Furthermore we argue that the term "bidding market" as it is widely used in antitrust is unhelpful or misleading. Auctions and bidding processes do have some special features - including their price formation processes, common-values behaviour, and bid-taker power - but the significance of these features has been overemphasized, and they often imply a need for stricter rather than more lenient competition policy.

Keywords: Auctions, Bidding Markets, Competition Policy, Bidding, Antitrust, Market Power, Common Values, Anti-trust

JEL Classification: L400, D440, K210, L100

Suggested Citation

Klemperer, Paul, Competition Policy in Auctions and 'Bidding Markets'. Available at SSRN: https://ssrn.com/abstract=1119312

Paul Klemperer (Contact Author)

University of Oxford - Department of Economics ( email )

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Oxford, OX1 3BJ
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+44 1865 278 588 (Phone)
+44 1865 278 557 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

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London, EC1V 3PZ
United Kingdom

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