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Auctioning business licenses to engage in Cournot competition

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  • Cho, Myeonghwan
  • Song, Joon

Abstract

We study auctions for business licenses, where only the winners can participate in Cournot competition. This is an example of a multi-unit auction with endogenous and interdependent values. We compare a pay-as-bid auction and a uniform price auction. Assuming that only the winners’ identity and their payments are announced after the auction, the former auction is advantageous in terms of auction revenue, and the latter is advantageous in terms of consumer surplus.

Suggested Citation

  • Cho, Myeonghwan & Song, Joon, 2022. "Auctioning business licenses to engage in Cournot competition," Economics Letters, Elsevier, vol. 210(C).
  • Handle: RePEc:eee:ecolet:v:210:y:2022:i:c:s0165176521004390
    DOI: 10.1016/j.econlet.2021.110176
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    References listed on IDEAS

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    1. Isa Hafalir & Vijay Krishna, 2008. "Asymmetric Auctions with Resale," American Economic Review, American Economic Association, vol. 98(1), pages 87-112, March.
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    More about this item

    Keywords

    Multi-unit auction; Post-auction competition; License auction;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing

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