The Simple Algebra of Surplus in Private Values Open Auctions: A Nested Logit Merger Model

In a private values, open auction, the authors show that bidder surplus can be expressed as a simple difference between unconditional moments of order statistics. The strength of the result is its simplicity and generality, as the authors dispense with the typical assumptions of independence or symmetry. The authors show how to use the expression to derive closed-form expressions for the effects of a merger among bidders for any joint value distribution.