On the Efficiency of Competitive Markets for Operating Licenses
Some economists and policy makers have suggested that market allocation of scarce operating licenses, broadcasti ng licenses, and airport "slots," for instance, would lead to their efficient use. This paper demonstrates that a competitive market all ocation of operating licenses, whether attained through auctioning, s elling, or allowing resale of the rights, does not, in general, assur e efficiency. The profit criterion that would guide the allocation of licenses in a competitive market would not necessarily lead to the u ses that maximize social benefits. The paper shows that the differenc e between private and social incentives in the allocation process can be quite large. The theory is then applied to discussions of allocat ing airport takeoff and landing slots and broadcasting licenses. Copyright 1988, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Volume (Year): 103 (1988)
Issue (Month): 2 (May)
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