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Testing for common costs in the City of Helsinki bus transit auctions

  • Tukiainen, Janne
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    I study the effects of competition in the City of Helsinki bus transit market by conducting two tests for common costs in these first-price sealed-bid procurement auctions. I introduce bidder asymmetry and pooling to the tests. I also discuss the need for robustness checks for some arbitrary choices in these tests. The information environment seems to be that of common costs. The bus companies that have garages close to the contracted routes are influenced more by the common elements than those whose garages are further away. More competition does not necessarily lower procurement costs, and the City should not necessarily implement costly policies to induce more competition. A recent merger of two public companies cannot be criticized from a competition perspective.

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    Article provided by Elsevier in its journal International Journal of Industrial Organization.

    Volume (Year): 26 (2008)
    Issue (Month): 6 (November)
    Pages: 1308-1322

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    Handle: RePEc:eee:indorg:v:26:y:2008:i:6:p:1308-1322
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    1. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Elena Krasnokutskaya, 2004. "Identification and Estimation in Highway Procurement Auctions under Unobserved Auction Heterogeneity," PIER Working Paper Archive 05-006, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    3. Oliver Linton & Esfandiar Maasoumi & Yoon-Jae Whang, 2003. "Consistent testing for stochastic dominance under general sampling schemes," LSE Research Online Documents on Economics 2208, London School of Economics and Political Science, LSE Library.
    4. Cantillon, Estelle & Pesendorfer, Martin, 2007. "Combination Bidding in Multi-Unit Auctions," CEPR Discussion Papers 6083, C.E.P.R. Discussion Papers.
    5. Patrick Bajari & Ali Hortacsu, 2003. "Are Structural Estimates of Auction Models Reasonable? Evidence from Experimental Data," Working Papers 03002, Stanford University, Department of Economics.
    6. Athey, Susan & Haile, Philip A., 2007. "Nonparametric Approaches to Auctions," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 60 Elsevier.
    7. Laffont, Jean-Jacques & Vuong, Quang, 1996. "Structural Analysis of Auction Data," American Economic Review, American Economic Association, vol. 86(2), pages 414-20, May.
    8. Joris Pinkse & Guofu Tan, 2005. "The Affiliation Effect in First-Price Auctions," Econometrica, Econometric Society, vol. 73(1), pages 263-277, 01.
    9. repec:oup:qjecon:v:104:y:1989:i:2:p:371-83 is not listed on IDEAS
    10. Estelle Cantillon & Martin Pesendorfer, 2006. "Auctioning bus routes: the London experience," ULB Institutional Repository 2013/9003, ULB -- Universite Libre de Bruxelles.
    11. repec:oup:restud:v:69:y:2002:i:4:p:871-98 is not listed on IDEAS
    12. Emmanuel Guerre & Isabelle Perrigne & Quang Vuong, 2000. "Optimal Nonparametric Estimation of First-Price Auctions," Econometrica, Econometric Society, vol. 68(3), pages 525-574, May.
    13. Paarsch, Harry J., 1992. "Deciding between the common and private value paradigms in empirical models of auctions," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 191-215.
    14. repec:oup:restud:v:44:y:1977:i:3:p:511-18 is not listed on IDEAS
    15. Philip A. Haile & Han Hong & Matthew Shum, 2003. "Nonparametric Tests for Common Values in First-Price Sealed-Bid Auctions," Cowles Foundation Discussion Papers 1445, Cowles Foundation for Research in Economics, Yale University.
    16. Quang Vuong & Sandra Campo & Isabelle Perrigne, 2003. "Asymmetry in first-price auctions with affiliated private values," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(2), pages 179-207.
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