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Competition and Regulation in Franchise Bidding

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  • Nicola Doni

Abstract

In this work we show that the separation property identified in the franchise bidding literature depends strictly on the hypothesis of coincidence of the regulator's beliefs with those of the competing firms. Nevertheless, in many contexts it is more truthful to hypothesize that the regulator's information is vaguer than that of the producers, so we introduce the possibility that the regulator is dealing with a double informational asymmetry as compared to the firms. In this case, the separation property is no longer valid, and the optimal tariff becomes a decreasing function of the degree of competition exercised during the auction.

Suggested Citation

  • Nicola Doni, 2004. "Competition and Regulation in Franchise Bidding," Journal of Regulatory Economics, Springer, vol. 25(3), pages 223-242, May.
    • Handle: RePEc:kap:regeco:v:25:y:2004:i:3:p:223-242
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    Cited by:

    1. Gunnar Alexandersson & Staffan Hultén, 2006. "Predatory bidding in competitive tenders: A Swedish case study," European Journal of Law and Economics, Springer, vol. 22(1), pages 73-94, July.
    2. Bing Ye & Sanxi Li, 2018. "Competitive contracts with productive information gathering," Journal of Economics, Springer, vol. 124(1), pages 1-17, May.
    3. Michel Mougeot & Florence Naegelen, 2011. "Franchise bidding, regulation and investment costs," Review of Economic Design, Springer;Society for Economic Design, vol. 15(1), pages 37-58, March.

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