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Mergers, Cartels, Set-Asides, and Bidding Preferences in Asymmetric Oral Auctions

Lance Brannman and Luke M. Froeb

Posted Online March 13, 2006
https://doi.org/10.1162/003465300558795

Review of Economics and Statistics

Volume 82 | Issue 2 | May 2000
p.283-290
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Mergers, Cartels, Set-Asides, and Bidding Preferences in Asymmetric Oral Auctions

Lance Brannman and Luke M. Froeb
https://doi.org/10.1162/003465300558795
Received: June 04, 1997
Accepted: March 02, 1999
Published Online: March 13, 2006
Abstract

From bidding data, we estimate the underlying value distribution for Forest Service timber. We find that bidder values decrease $2/mbf (thousand board feet) with each mile from the tract and that small firms (fewer than 500 employees) have values that are $72/mbf lower than large firms. The empirical value distribution is used to simulate various hypothetical scenarios designed to inform public policy. The most anticompetitive mergers raise price by less than 3%, and a 4% decline in marginal costs through greater merger efficiencies is enough to offset a 1% anticompetitive price increase. Eliminating the SBA set-aside program would raise timber revenues by 15%. A policy of granting bidding preferences to small and more-distant bidders would raise revenue by approximately one-tenth of one percent.

Lance Brannman
National University of Kyiv-Mohyla Academy (Kyiv, Ukraine)
Luke M. Froeb
Owen Graduate School of Management at Vanderbilt University
https://doi.org/10.1162/003465300558795
Abstract

From bidding data, we estimate the underlying value distribution for Forest Service timber. We find that bidder values decrease $2/mbf (thousand board feet) with each mile from the tract and that small firms (fewer than 500 employees) have values that are $72/mbf lower than large firms. The empirical value distribution is used to simulate various hypothetical scenarios designed to inform public policy. The most anticompetitive mergers raise price by less than 3%, and a 4% decline in marginal costs through greater merger efficiencies is enough to offset a 1% anticompetitive price increase. Eliminating the SBA set-aside program would raise timber revenues by 15%. A policy of granting bidding preferences to small and more-distant bidders would raise revenue by approximately one-tenth of one percent.

Lance Brannman
National University of Kyiv-Mohyla Academy (Kyiv, Ukraine)
Luke M. Froeb
Owen Graduate School of Management at Vanderbilt University
Download Options

Mergers, Cartels, Set-Asides, and Bidding Preferences in Asymmetric Oral Auctions

Lance Brannman and Luke M. Froeb
https://doi.org/10.1162/003465300558795
Received: June 04, 1997
Accepted: March 02, 1999
Published Online: March 13, 2006
Abstract

From bidding data, we estimate the underlying value distribution for Forest Service timber. We find that bidder values decrease $2/mbf (thousand board feet) with each mile from the tract and that small firms (fewer than 500 employees) have values that are $72/mbf lower than large firms. The empirical value distribution is used to simulate various hypothetical scenarios designed to inform public policy. The most anticompetitive mergers raise price by less than 3%, and a 4% decline in marginal costs through greater merger efficiencies is enough to offset a 1% anticompetitive price increase. Eliminating the SBA set-aside program would raise timber revenues by 15%. A policy of granting bidding preferences to small and more-distant bidders would raise revenue by approximately one-tenth of one percent.

Lance Brannman
National University of Kyiv-Mohyla Academy (Kyiv, Ukraine)
Luke M. Froeb
Owen Graduate School of Management at Vanderbilt University
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