Merging Auction Houses
- Topics:
- Mergers
- Source:
- Vanderbilt University
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Overview: This paper studies the incentives for market concentration of (online and traditional) auction houses. Would sellers and buyers be better off if two separate auction houses merged? It is supposed that each auction house has a separate clientele of sellers and buyers. Sellers value their (identical) units at 0, while buyers have independent private values. Each auction house uses an ascending auction or by revenue equivalence, any auction mechanism that allocates units efficiently among those buyers at that auction house. If no buyers are lost upon the merger, the efficiency gains increase, but that the expected sellers’ revenue increases by more than the efficiency gains, leaving the buyers worse off. The paper shows that if buyers choose whether to participate or not, it is possible upon a merger that so many buyers are lost, the sellers are actually worse off. It concludes that without transfers from sellers to buyers, the merger may or may not be profitable for sellers.
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Format: PDF | Size: 84KB | Date: Feb 2003 | Pages: 18
