
[9702] Mergers Among Asymmetric Bidders: A Logit SecondPrice Auction Modelby Luke M. Froeb, Steven Tschantz, and Philip Crooke
(May 6, 1998) Abstract In this paper, we derive estimators of, and closedform (non integral) expressions for, the distribution of bids in an extreme value, asymmetric, secondprice, privatevalues auction. In equilibrium, prices (winning bids) and shares (winning probabilities) have a simple monotonic relationshiphighervalue firms win more frequently and at better prices than lowervalue firms. Since the extreme value distribution is closed under the maximum function, the value of the merged coalition also has an extreme value distribution and thus lies on the same price/share curve. Consequently, merger price effects can be computed as a movement along the price/share curve, from the average pre merger share to the post merger aggregate share. The parameter determining how much winning prices change is the standard deviation of the extreme value component. Merger efficiency claims can be benchmarked against the marginal cost reductions necessary to offset merger price effects. 