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License prices for financially constrained firms

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Author Info

  • Roberto Burguet

    ()

  • R. McAfee

    ()

Abstract

It is often alleged that high auction prices inhibit build-out. We investigate this claim under the extreme case of budget-constrained bidders. Low prices maximize overall the gains from trade. If there are n licenses, the price where the budget constraint just binds maximizes consumer surplus if the elasticity of demand is less than one plus 1/n. If demand is elastic, auctions maximize consumer surplus when build-out expenditure greater than one over the elasticity of demand. This appears to be true for most of the auctions run.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s11149-009-9092-5
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Bibliographic Info

Article provided by Springer in its journal Journal of Regulatory Economics.

Volume (Year): 36 (2009)
Issue (Month): 2 (October)
Pages: 178-198

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Handle: RePEc:kap:regeco:v:36:y:2009:i:2:p:178-198

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Web page: http://www.springerlink.com/link.asp?id=100298

Related research

Keywords: Financing constraints; 3G auctions; Licenses; Budget constraints; Service deployment; Rollout; L51; D45;

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References

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Citations

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Cited by:
  1. Masili, Gustavo, 2006. "Auction with aftermarket for budget constrained bidders," MPRA Paper 2134, University Library of Munich, Germany.
  2. Carolyn Pitchik, 2008. "Budget-Constrained Sequential Auctions with Incomplete Information," Working Papers tecipa-342, University of Toronto, Department of Economics.
  3. Kai Konrad, 2012. "Information alliances in contests with budget limits," Public Choice, Springer, vol. 151(3), pages 679-693, June.

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