The Simple Algebra of Surplus in Open, Private Values Auctions: A Nested Logit Merger Model
9 Pages Posted: 21 Aug 2017 Last revised: 2 Oct 2018
Date Written: July 5, 2017
In a private values, open auction, we show that bidder surplus can be expressed as a simple difference between unconditional moments of order statistics. The strength of the result is its simplicity and generality, as we dispense with the typical assumptions of independence and/or symmetry. We show how to use the expression to derive closed-form expressions for the effects of a merger among bidders for any joint value distribution, and illustrate its use by simulating the effects of the 2016 proposed Anthem-Cigna merger using a nested logit specification.
Keywords: Auctions; Merger; Antitrust; Horizontal Anticompetitive Practices, Nested Logit
JEL Classification: D44, L41, G34
Suggested Citation: Suggested Citation