IDEAS home Printed from https://ideas.repec.org/p/cni/wpaper/2006-16.html
   My bibliography  Save this paper

Number of Bidders and the Winner’s Curse in Toll Road Concessions: An Empirical Analysis

Author

Listed:
  • Laure Athias

    () (ATOM, Université de Paris Sorbonne)

  • Antonio Nuñez

    () (Laboratoire d’Economie des Transports, Université de Lyon)

Abstract

In this paper, we empirically assess the effects of the winner’s curse in auctions for road concession contracts. Such auctions are private- and common-value auctions, and they are on concession contracts which are incomplete contracts prone to pervasive renegotiations (Guasch 2004, Engel 2005, Athias-Saussier 2006). We address three questions in turn. First, we investigate the overall effects of the winner’s curse on bidding behaviour in such auctions. Second, we examine the effects of the winner’s curse on contract auctions with differing levels of common-value components. Third, we investigate how the winner’s curse affects bidding behaviour in such auctions when we account for the possibility for bidders to renegotiate. Using a unique dataset of 37 road concessions worldwide, we show that the winner’s curse effect is particularly strong in toll road concession contract auctions, implying the prevalence of common value components over private value components in such auctions. Thus, we show that bidders bid less aggressively in toll road concession auctions when they expect more competition. Besides, we observe that this winner’s curse effect is even larger for projects where the common uncertainty is greater. Perhaps more interestingly, we show that the winner’s curse effect is weaker when the likelihood of renegotiation is higher, i.e. bidders will bid more strategically in weaker institutional frameworks, in which renegotiations are easier.

Suggested Citation

  • Laure Athias & Antonio Nuñez, 2006. "Number of Bidders and the Winner’s Curse in Toll Road Concessions: An Empirical Analysis," Working Papers 2006-16, Center for Network Industries and Infrastructure (CNI).
  • Handle: RePEc:cni:wpaper:2006-16
    as

    Download full text from publisher

    File URL: http://www.cni.tu-berlin.de/fileadmin/documents/RePEc/cni/working_paper/athias_nunez_2006_number-of-bidders-andthe-winners-curse-in-toll-road-concessions_cni_wp_no_2006-16.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Rubinfeld, Daniel L & Singer, Hal J, 2001. "Vertical Foreclosure in Broadband Access?," Journal of Industrial Economics, Wiley Blackwell, vol. 49(3), pages 299-318, September.
    2. Church, Jeffrey & Gandal, Neil, 1992. "Network Effects, Software Provision, and Standardization," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 85-103, March.
    3. Scott Savage & Michael Wirth, 2005. "Price, Programming and Potential Competition in US Cable Television Markets," Journal of Regulatory Economics, Springer, vol. 27(1), pages 25-46, September.
    4. Jeffrey Church & Neil Gandal, 2000. "Systems Competition, Vertical Merger, and Foreclosure," Journal of Economics & Management Strategy, Wiley Blackwell, pages 25-51.
    5. Doganoglu, Toker & Wright, Julian, 2006. "Multihoming and compatibility," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 45-67, January.
    6. Dos Santos Ferreira, Rodolphe & Thisse, Jacques-Francois, 1996. "Horizontal and vertical differentiation: The Launhardt model," International Journal of Industrial Organization, Elsevier, pages 485-506.
    7. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
    8. Faulhaber, Gerald R & Hogendorn, Christiaan, 2000. "The Market Structure of Broadband Telecommunications," Journal of Industrial Economics, Wiley Blackwell, vol. 48(3), pages 305-329, September.
    9. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
    10. Gehrig, Thomas, 1998. "Competing markets," European Economic Review, Elsevier, vol. 42(2), pages 277-310, February.
    11. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-414, May.
    12. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Multiproduct Firms, Product Differentiation, and Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
    13. Shane Greenstein, 2006. "Innovation and the Evolution of Market Structure for Internet Access in the United States," Discussion Papers 05-018, Stanford Institute for Economic Policy Research.
    14. repec:reg:rpubli:65 is not listed on IDEAS
    15. Hahn Robert W. & Wallsten Scott, 2006. "The Economics of Net Neutrality," The Economists' Voice, De Gruyter, vol. 3(6), pages 1-7, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Theory of contract auctions; common value; winner’s curse; concession; opportunistic behaviour; incomplete contract;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cni:wpaper:2006-16. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fabian Kirsch). General contact details of provider: http://edirc.repec.org/data/cntubde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.