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License Prices for Financially Constrained Firms

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  • Roberto Burguet

    ()

  • R. Preston McAfee

    ()

Abstract

It is often alleged that high auction prices inhibit service deployment. We investigate this claim under the extreme case of financially constrained bidders. If demand is just slightly elastic, auctions maximize consumer surplus if consumer surplus is a convex function of quantity (a common assumption), or if consumer surplus is concave and the proportion of expenditure spent on deployment is greater than one over the elasticity of demand. The latter condition appears to be true for most of the large telecom auctions in the US and Europe. Thus, even if high auction prices inhibit service deployment, auctions appear to be optimal from the consumers' point of view.

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Bibliographic Info

Paper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 745.08.

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Length: 36
Date of creation: 02 Jun 2008
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Handle: RePEc:aub:autbar:745.08

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

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