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Entry Deterrence and Collusion at Repeated Multiunit Auctions of ITQs

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  • Julio Peña-Torres
  • Roberto Muñoz
  • Felipe Quezada

Abstract

We study revenue, entry, and possible collusion outcomes in the Chilean fishery with the longest record of individual transferable share quotas allocated via public auctions. We examine 18 annual multi-object auctions and two different auction designs at work. Based on results from a numerically calibrated auction model and econometric estimates, we claim that the repeated use of sequential oral (multiunit) auctions was particularly prone to bid rigging and facilitated entry deterrence. Yet, efficient entry was possible thanks to fully transferable quota rights. We highlight two conclusions from these results: First, when selling multiple production rights in a highly concentrated industry repeatedly over time, auctioneers should avoid using sequential, English auctions. Second, transferable production rights help overcome inefficiencies that can arise from design flaws in the chosen mechanism for allocating these rights.

Suggested Citation

  • Julio Peña-Torres & Roberto Muñoz & Felipe Quezada, 2022. "Entry Deterrence and Collusion at Repeated Multiunit Auctions of ITQs," Marine Resource Economics, University of Chicago Press, vol. 37(4), pages 437-465.
    • Handle: RePEc:ucp:mresec:doi:10.1086/721014
    DOI: 10.1086/721014
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    Cited by:

    1. Juan Rosas-Munoz & José Antonio Carrillo-Viramontes, 2022. "Abundance of Resources and Incentives for Collusion in Fisheries," Sustainability, MDPI, vol. 14(22), pages 1-20, November.

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