Auctions for Private Congestible Infrastructures
AbstractThis paper investigates regulation by auctions of private supply of congestible infrastructures in two networks settings: 1) two serial facilities, where the consumer has to use both in order to consume; and 2) two parallel facilities that are imperfect substitutes. There are four market structures: a monopoly and 3 duopolies that differ in how firms interact. The effects of an auction depend on what the bidders compete. With a transfer auction, the bidders compete on how much money they transfer to the government. This auction leads to the same outcome as the game without an auction (for a given market structure), since this gives the maximum profit to transfer. An auction on the capacity of a facility leads to an even lower welfare than no auction, because firms set very high capacities and usage fees. Conversely, an auction on the generalised price or number of users leads to the first-best outcome. Moreover, these two auctions are robust: they attain the first-best regardless of whether the facilities are auctioned off to a single firm or to two, and for all market and network structures. On the contrary, the performances (relative to the first-best) of the transfer and capacity auctions strongly depend on these considerations.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 12-087/VIII.
Date of creation: 31 Aug 2012
Date of revision: 19 Oct 2012
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Web page: http://www.tinbergen.nl
private supply; congestible facilities; auctions; serial facilities; parallel facilities; imperfect substitutes;
Other versions of this item:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion
- R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-16 (All new papers)
- NEP-COM-2012-09-16 (Industrial Competition)
- NEP-TRE-2012-09-16 (Transport Economics)
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