The Effect of Profit Sharing on Auction Markets

18 Pages Posted: 14 Feb 2004

See all articles by Patrick Greenlee

Patrick Greenlee

U.S. Department of Justice - Antitrust Division

Keith Waehrer

Bates White Economic Consulting

Date Written: February 2004

Abstract

We consider an independent private value auction environment in which bidders own passive partial claims of rival bidder's auction profits. While cross ownership confers no ability to directly affect bidding behavior, claims on rival profits dampen bidding competition. When bidders hold the same aggregate level of shares in rival bidders in a first-price auction, cross ownership has an effect similar to reducing the number of bidders. A similar decrease in competition occurs in English auctions. When there is cross ownership, the seller prefers first-price auctions to English auctions.

Keywords: Auctions, antitrust

JEL Classification: D44, L41

Suggested Citation

Greenlee, Patrick and Waehrer, Keith, The Effect of Profit Sharing on Auction Markets (February 2004). Available at SSRN: https://ssrn.com/abstract=500083 or http://dx.doi.org/10.2139/ssrn.500083

Patrick Greenlee

U.S. Department of Justice - Antitrust Division ( email )

600 E Street NW
Suite 10,000
Washington, DC 20530
United States

Keith Waehrer (Contact Author)

Bates White Economic Consulting ( email )

2001 K Street, NW
North Building, Suite 500
Washington, DC 20006
United States

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