Horizontal Mergers in Optimal Auctions

35 Pages Posted: 8 Mar 2016 Last revised: 1 Feb 2017

See all articles by Luke M. Froeb

Luke M. Froeb

Vanderbilt University - Owen Graduate School of Management

Vlad Mares

INSEAD

Steven Tschantz

Vanderbilt University - Department of Mathematics

Date Written: January 30, 2017

Abstract

Following merger, an optimal mechanism discriminates against merging bidders with higher reserve prices and by allocating more often towards non-merging bidders. In this setting, we show that mergers always harm the auctioneer, benefit non-merging bidders, can increase total surplus, and have effects that decrease with increases in the auctioneer's reservation value, to the point where the merger can become unprofitable. Merger effects are also much smaller than in open auctions because bidders compete more against an optimal mechanism than they do against each other. As a consequence, there is less competition for mergers to eliminate.

Keywords: Mechanism Design, Optimal Auctions, Merger, Buyer Power, Antitrust, Horizontal Anticompetitive Practices

JEL Classification: D82, L41, G34

Suggested Citation

Froeb, Luke M. and Mares, Vladimir and Tschantz, Steven T., Horizontal Mergers in Optimal Auctions (January 30, 2017). Vanderbilt Owen Graduate School of Management Research Paper No. 2742187. Available at SSRN: https://ssrn.com/abstract=2742187 or http://dx.doi.org/10.2139/ssrn.2742187

Luke M. Froeb (Contact Author)

Vanderbilt University - Owen Graduate School of Management ( email )

401 21st Avenue South
Nashville, TN 37203
United States
615-322-9057 (Phone)
615-343-7177 (Fax)

Vladimir Mares

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

Steven T. Tschantz

Vanderbilt University - Department of Mathematics ( email )

Nashville, TN 37240
United States

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