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Debiasing through auction? Inertia in the liberalization of retail markets

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Listed:
  • Paolo Bertoletti
  • Clara Poletti

Abstract

We analize a market in the process of liberalization. Consumers are biased in favor of the incumbent firm and we assume that they can discover the true value of new suppliers only by switching. In an infinitely-repeated game setting with Bertrand competition, we first show that efficient entry might not take place. We then evaluate the effect of organizing a public auction for assigning consumers to a default supplier and show that such a mechanism (which respects the freedom of choice by consumers) would support entry efficiency. However, auctioning might also increase inefficient, although temporary, entry.

Suggested Citation

  • Paolo Bertoletti & Clara Poletti, 2012. "Debiasing through auction? Inertia in the liberalization of retail markets," IEFE Working Papers 47, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
    • Handle: RePEc:bcu:iefewp:iefewp47
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    References listed on IDEAS

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    3. Waterson, Michael, "undated". "Consumers and Competition," Economic Research Papers 269563, University of Warwick - Department of Economics.
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    5. Waterson, Michael, 2003. "The role of consumers in competition and competition policy," International Journal of Industrial Organization, Elsevier, vol. 21(2), pages 129-150, February.
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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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