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Advantaged Bidders in Franchise Auctions

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  • Vincent van den Berg

    (VU University Amsterdam)

Abstract

Consider 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.

Suggested Citation

  • Vincent van den Berg, 2012. "Advantaged Bidders in Franchise Auctions," Tinbergen Institute Discussion Papers 12-117/VIII, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20120117
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    File URL: https://papers.tinbergen.nl/12117.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Franchising; auctions; advantaged bidders; incumbent; private supply; regulatory auctions;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - 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; Travel Time; Safety and Accidents; Transportation Noise
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning

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