On Bidding Markets: The Role of Competition (Job-Market Paper)

Abstract

This paper analyzes the e¤ects of industrial concentration on bidding behavior and hence, on the seller s expected proceeds. These e¤ects are studied under the CIPI model, an a¢ liated value set-up that nests a variety of valuation and information environments. We formally decompose the revenue e¤ects coming from less competition into four types: a competition e¤ect, an inference e¤ect, a winner s curse e¤ect and a sampling e¤ect. The properties of these e¤ects are discussed and conditions for (non)monotonicity of both the equilibrium bid and revenue are stated. Our results suggest that it is more likely that the seller bene ts from less competition in markets with more complete valuation and information structures.