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The simple algebra of surplus in private values open auctions: A nested logit merger model

Author

Listed:
  • Luke M. Froeb

    (U.S. Dept of Justice and Vanderbilt University)

  • Vladimir Mares

    (INSEAD)

  • Steven Tschantz

    (Vanderbilt University)

  • Charles Taragin

    (US Dept. of Justice, Washington)

Abstract

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 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.

Suggested Citation

  • Luke M. Froeb & Vladimir Mares & Steven Tschantz & Charles Taragin, 2018. "The simple algebra of surplus in private values open auctions: A nested logit merger model," Economics Bulletin, AccessEcon, vol. 38(4), pages 2304-2312.
    • Handle: RePEc:ebl:ecbull:eb-18-00431
    as

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    References listed on IDEAS

    as
    1. Miller, Nathan H., 2014. "Modeling the effects of mergers in procurement," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 201-208.
    2. Gloria Sheu & Charles Taragin, 2021. "Simulating mergers in a vertical supply chain with bargaining," RAND Journal of Economics, RAND Corporation, vol. 52(3), pages 596-632, September.
    3. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    4. Lance Brannman & Luke M. Froeb, 2000. "Mergers, Cartels, Set-Asides, and Bidding Preferences in Asymmetric Oral Auctions," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 283-290, May.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Gloria Sheu & Charles Taragin, 2021. "Simulating mergers in a vertical supply chain with bargaining," RAND Journal of Economics, RAND Corporation, vol. 52(3), pages 596-632, September.

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    More about this item

    Keywords

    Surplus; Private-Values Auctions; Merger; Antitrust; Horizontal Anticompetitive Practices;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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