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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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    File URL: http://www.sciencedirect.com/science/article/B6V8P-4RJ9X22-1/2/771ccc0676124a02f098dedacec8040b
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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
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

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    12. 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.
    13. Emmanuel Guerre & Isabelle Perrigne & Quang Vuong, 2000. "Optimal Nonparametric Estimation of First-Price Auctions," Econometrica, Econometric Society, vol. 68(3), pages 525-574, May.
    14. Wilson, Robert, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 511-18, October.
    15. 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.
    16. 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.
    17. 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.
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