Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87258
Authors: 
Janssen, Maarten
Karamychev, Vladimir
Year of Publication: 
2013
Series/Report no.: 
Tinbergen Institute Discussion Paper 13-012/VII
Abstract: 
We analyze the effects of mergers in first-price sealed-bid auctions on bidders' equilibrium bidding functions and on revenue. We also study the incentives of bidders to merge given the private information they have. We develop two models, depending on how after-merger valuations are created. In the first, single-aspect model, the valuation of the merged firm is the maximum of the valuations of the two firms engaged in the merger. In the multi-aspect model, a bidder's valuation is the sum of two components and a merged firm chooses the maximum of each component of the two merging firms. In the first model, a merger creates incentives for bidders to shade their bids leading to lower revenue. In the second model, the non-merging firms do not shade their bids and revenue is actually higher. In both models, we show that all bidders have an incentive to merge.
Subjects: 
Mergers
first-price sealed-bid auctions
JEL: 
D44
D82
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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