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On the Efficiency of Competitive Markets for Operating Licenses

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  • Borenstein, Severin

Abstract

Some economists and policy makers have suggested that market allocation of scarce operating licenses, broadcasti ng licenses, and airport "slots," for instance, would lead to their efficient use. This paper demonstrates that a competitive market all ocation of operating licenses, whether attained through auctioning, s elling, or allowing resale of the rights, does not, in general, assur e efficiency. The profit criterion that would guide the allocation of licenses in a competitive market would not necessarily lead to the u ses that maximize social benefits. The paper shows that the differenc e between private and social incentives in the allocation process can be quite large. The theory is then applied to discussions of allocat ing airport takeoff and landing slots and broadcasting licenses. Copyright 1988, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 103 (1988)
Issue (Month): 2 (May)
Pages: 357-85

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Handle: RePEc:tpr:qjecon:v:103:y:1988:i:2:p:357-85

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Cited by:
  1. Volker Nocke & Peter EsoLucy White, 2007. "Competition for Scarce Resources," Economics Series Working Papers 365, University of Oxford, Department of Economics.
  2. Joel Waldfogel, 1999. "Preference Externalities: An Empirical Study of Who Benefits Whom in Differentiated Product Markets," NBER Working Papers 7391, National Bureau of Economic Research, Inc.
  3. Eftichios Sartzetakis, 1997. "Tradeable emission permits regulations in the presence of imperfectly competitive product markets: Welfare implications," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 9(1), pages 65-81, January.
  4. Carlsson, Fredrik, 2002. "Airport Marginal Cost Pricing: Discussion and an Application to Swedish Airports," Working Papers in Economics 85, University of Gothenburg, Department of Economics.
  5. Hagem, Cathrine & Mæstad, Ottar, 2003. "Market power in the market for greenhouse gas emissions permits - the interplay with the fossil fuel markets," Memorandum 34/2002, Oslo University, Department of Economics.
  6. Sang-Ho Lee & Sang-Ha Park, 2005. "Tradable Emission Permits Regulations: The Role of Product Differentiation," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 4(3), pages 249-261, December.
  7. Peter Cramton & Evan Kwerel & Gregory Rosston & Andrzej Skrzypacz, 2012. "Using Spectrum Auctions to Enhance Competition in Wireless Services," Papers of Peter Cramton 11ckrs, University of Maryland, Department of Economics - Peter Cramton, revised 2012.
  8. Michael Toman & Karen Palmer, 1997. "How should an accumulative toxic substance be banned?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 9(1), pages 83-102, January.
  9. Daniele Condorelli, 2007. "Efficient and Equitable Airport Slot Allocation," Rivista di Politica Economica, SIPI Spa, vol. 97(1), pages 81-104, January-F.
  10. Nilsson, Jan-Eric, 2002. "Towards a welfare enhancing process to manage railway infrastructure access," Transportation Research Part A: Policy and Practice, Elsevier, vol. 36(5), pages 419-436, June.
  11. Eftichios Sartzetakis, 2004. "On the Efficiency of Competitive Markets for Emission Permits," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 27(1), pages 1-19, January.
  12. Wooders, M. & Zissimos, B., 2001. "The Efficiency, Equity and Politics of Emission Permit Trading," The Warwick Economics Research Paper Series (TWERPS) 586, University of Warwick, Department of Economics.
  13. E. Glen Weyl & Michal Fabinger, 2013. "Pass-Through as an Economic Tool: Principles of Incidence under Imperfect Competition," Journal of Political Economy, University of Chicago Press, vol. 121(3), pages 528 - 583.
  14. Hagem, Cathrine & Maestad, Ottar, 2006. "Russian exports of emission permits under the Kyoto Protocol: The interplay with non-competitive fuel markets," Resource and Energy Economics, Elsevier, vol. 28(1), pages 54-73, January.
  15. Fukui, Hideki, 2010. "An empirical analysis of airport slot trading in the United States," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 330-357, March.
  16. Nilsson, Jan-Eric, 2012. "Congestion and scarcity in scheduled transport modes," Working papers in Transport Economics 2012:25, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
  17. Amnon Levy & Michael R. Caputo & Benoît Pierre Freyens, 2013. "Royalties, Entry and Spectrum Allocation to Broadcasting," Economics Working Papers wp13-02, School of Economics, University of Wollongong, NSW, Australia.
  18. Hugo Ferreira Braga Tadeu & Jersone Tasso Moreira Silva, 2012. "A Theoretical Framework for the Brazilian Airline Competitive Market Environment," Review of Economics & Finance, Better Advances Press, Canada, vol. 2, pages 97-106, May.

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