Bidding Markets

41 Pages Posted: 18 Aug 2005

See all articles by Paul Klemperer

Paul Klemperer

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

Date Written: June 2005

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 characterized 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 behavior, 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: Bidding Markets, Auctions, Antitrust, Competition Policy, Bidding, Market Power, Private Values, Common Values, Anti-trust

JEL Classification: L40, D44, K21, L10

Suggested Citation

Klemperer, Paul, Bidding Markets (June 2005). Available at SSRN: https://ssrn.com/abstract=776524 or http://dx.doi.org/10.2139/ssrn.776524

Paul Klemperer (Contact Author)

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom
+44 1865 278 588 (Phone)
+44 1865 278 557 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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