Auctions of licences and market structure
This paper studies sequential auctions of licences to participate in a symmetric market game. Assuming that the rate at which industry profits decrease with repeated entry is not too large, at the unique solution either a single firm preempts entry altogether or entry occurs in every stage, depending on the net benefit of complete preemption to an incumbent. If we relax the assumption, a third outcome can occur: two firms may coordinate their choices to avoid further entry. The analysis employs a new refinement of Nash equilibrium, the concept of recursively undominated equilibrium.
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Volume (Year): 19 (2002)
Issue (Month): 2 ()
|Note:||Received: February 25, 2000; revised version: September 12, 2000|
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