Advantaged Bidders in Franchise Auctions
AbstractConsider a government that auctions a franchise for, e.g., an airport, telecommunication network, or utility. Consider an 'incumbent bidder' that owns a complement or substitute. With an auction on the transfer (i.e. payment) to the government, the incumbent is advantaged.If the government regulates the market with an auction on the price asked to consumers, it depends who is advantaged. With complements, the incumbent is advantaged: it can set a lower price on the new franchise, as this increases the profit of the other. With substitutes, the incumbent is disadvantaged. In many settings, the advantage bidder always wins.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 12-117/VIII.
Date of creation: 02 Nov 2012
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Franchising; auctions; advantaged bidders; incumbent; private supply; regulatory auctions;
Find related papers by JEL classification:
- 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 Systems - - - Transportation: Demand, Supply, and Congestion
- R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Systems - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-17 (All new papers)
- NEP-COM-2012-11-17 (Industrial Competition)
- NEP-MIC-2012-11-17 (Microeconomics)
- NEP-REG-2012-11-17 (Regulation)
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