On the Competitive Effects of Bidding Syndicates

B.E. Journal of Economic Analysis & Policy [Frontiers]

Firms commonly form syndicates to bid jointly for financial assets. Recently, this practice has come under legal scrutiny motivated by models which suggest syndicates may be anticompetitive. These models do not account for two important features of financial markets: bidders' value estimates are likely to be correlated with each other, and complicated mechanisms known to be optimal in such settings are eschewed in favor of simple auction formats. We show that these features make it possible for syndicate bidding to generate higher revenues for the auctioneer, even when syndicates lead to a highly concentrated market.