License auctions when winning bids are financed through debt
AbstractWe study an auction where two licenses to operate on a new market are sold, and winning bidders finance their bids on the debt market. Higher bids imply higher debts, which affects product market competition. We compare our results to those of a beauty contest and a standard auction. For the case that debt induces firms to compete more aggressively, we find that consumer prices are lower, and expected firm profits are strictly positive although firms are a priori identical. When debt induces firms to compete less aggressively, we find that firms make zero profits, and consumer prices are higher.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 06F06.
Date of creation: 2006
Date of revision:
Other versions of this item:
- Marco A. Haan & Linda A. Toolsema, 2011. "License Auctions When Winning Bids Are Financed Through Debt," Journal of Industrial Economics, Wiley Blackwell, vol. 59(2), pages 254-281, 06.
- Haan, Marco A. & Toolsema, Linda A., 2003. "License auctions when winning bids are financed through debt," CCSO Working Papers 200310, University of Groningen, CCSO Centre for Economic Research.
- NEP-ALL-2006-07-09 (All new papers)
- NEP-COM-2006-07-09 (Industrial Competition)
- NEP-FMK-2006-07-09 (Financial Markets)
- NEP-MIC-2006-07-09 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- R. Preston McAfee & John McMillan, 1996. "Analyzing the Airwaves Auction," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 159-175, Winter.
- Wolfstetter, Elmar, 1996.
" Auctions: An Introduction,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 10(4), pages 367-420, December.
- van Damme, Eric, 2002. "The European UMTS-auctions," European Economic Review, Elsevier, vol. 46(4-5), pages 846-858, May.
- Zheng, Charles Z., 2001.
"High Bids and Broke Winners,"
Journal of Economic Theory,
Elsevier, vol. 100(1), pages 129-171, September.
- Heidrun C. Hoppe & Philippe Jehiel & Benny Moldovanu, 2006.
"License Auctions and Market Structure,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 15(2), pages 371-396, 06.
- Jehiel, Philippe & Moldovanu, Benny, 2000. "License Auctions and Market Structure," CEPR Discussion Papers 2530, C.E.P.R. Discussion Papers.
- Hakenes, Hendrik & Schnabel, Isabel, 2000. "License Auctions and Market Structure," Sonderforschungsbereich 504 Publications 01-21, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
- Tilman Börgers & Christian Dustmann, 2003. "Awarding telecom licences: the recent European experience," Economic Policy, CEPR & CES & MSH, vol. 18(36), pages 215-268, 04.
- John McMillan, 1994. "Selling Spectrum Rights," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 145-162, Summer.
- Haan, M.A. & Toolsema, L.A., 2003.
"The strategic use of debt reconsidered,"
03E37, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
- Emiel Maasland & Sander Onderstal, 2006.
"Going, Going, Gone! A Swift Tour of Auction Theory and its Applications,"
Springer, vol. 154(2), pages 197-249, June.
- Emiel Maasland & Sander Onderstal, 2006. "Going, Going, Gone! A Swift Tour of Auction Theory and Its Applications," De Economist, Springer, vol. 154(3), pages 481-481, September.
- Roberto Burguet & R. McAfee, 2009.
"License prices for financially constrained firms,"
Journal of Regulatory Economics,
Springer, vol. 36(2), pages 178-198, October.
- Roberto Burguet & R. Preston McAfee, 2008. "License Prices for Financially Constrained Firms," Working Papers 351, Barcelona Graduate School of Economics.
- Roberto Burguet & R. Preston McAfee, 2008. "License Prices for Financially Constrained Firms," UFAE and IAE Working Papers 745.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Roberto Burguet & Preston McAffee, 2005. "License Prices for Financially Constrained Firms," Working Papers 224, Barcelona Graduate School of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joke Bulthuis).
If references are entirely missing, you can add them using this form.