I. Introduction 1. Antitrust agencies and merging parties often use the second-score auction (SSA) model to evaluate the potential effects of a merger or acquisition on competition involving markets in which sellers and buyers set individualized prices for products, such as in industries like health insurance, broadline foodservice distribution, and marine water treatment chemicals. [1] While the analysis in the United States typically focuses on potential adverse price effects, in many of these cases the merging parties argue that efficiencies associated with the transaction will increase the incentive of the merged parties to compete. 2. Nathan Miller proposed a tractable stochastic version of the SSA model to study and calibrate the potential price effects of mergers among
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Efficiencies in the second-score auction model
The second-score auction (SSA) model is often used to evaluate the potential competitive effects of a merger or acquisition involving markets in which sellers and buyers set individualized prices for products. This article discusses the interpretation and implementation of efficiencies in the context of the SSA model. The effects of increased competition from efficiencies in the SSA model may be seen both (1) in reduced prices that predominantly benefit buyers that are not otherwise affected by the merger and (2) in certain situations in which buyer welfare increases through higher quality and higher prices. The latter suggests that the assessment of merger outcomes should be based on the change in consumer welfare rather than the change in prices alone.
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