Title: Analysis of mergers in first price auctions
In this paper, we analyze mergers in bidding markets. We
utilize data from procurement auctions in the Austrian construction sector and
estimate models of first-price sealed-bid auctions. Based on estimated cost and
markups, we run merger simulations and disentangle the market power effect from
potential cost efficiencies. We also compare static and dynamic models of first
price auctions. Finally, we compare the outcomes of the merger simulations with
the effects of actual mergers.
Our results show that market power and efficiency effects
are present post merger, leading to increased markups, but leaving the winning
bid essentially unaffected by the merger.