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Organizing Competition for the Market

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  • Iossa, Elisabetta
  • Rey, Patrick
  • Waterson, Michael

Abstract

The paper studies competition for the market in a setting where incumbents (and, to a lesser extent, neighboring incumbents) benefit from a cost advantage. The paper first compares the outcome of staggered and synchronous tenders, before drawing the implications for market design. We find that the timing of tenders should depend on the likelihood of monopolization. When monopolization is expected, synchronous tendering is preferable, as it strengthens the pressure that entrants exercise on the monopolist. When instead other firms remain active, staggered tendering is preferable, as it maximizes the competitive pressure that comes from the other firms.

Suggested Citation

  • Iossa, Elisabetta & Rey, Patrick & Waterson, Michael, 2019. "Organizing Competition for the Market," CEPR Discussion Papers 13461, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:13461
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    References listed on IDEAS

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    1. Barbosa, Klenio & Boyer, Pierre C., 2021. "Discrimination in Dynamic Procurement Design with Learning-by-doing," International Journal of Industrial Organization, Elsevier, vol. 77(C).
    2. Dakshina G. De Silva & Timothy Dunne & Georgia Kosmopoulou, 2003. "An Empirical Analysis of Entrant and Incumbent Bidding in Road Construction Auctions," Journal of Industrial Economics, Wiley Blackwell, vol. 51(3), pages 295-316, September.
    3. Dakshina G. De Silva, 2005. "Synergies in Recurring Procurement Auctions: An Empirical Investigation," Economic Inquiry, Western Economic Association International, vol. 43(1), pages 55-66, January.
    4. De Silva, Dakshina G. & Kosmopoulou, Georgia & Lamarche, Carlos, 2009. "The effect of information on the bidding and survival of entrants in procurement auctions," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 56-72, February.
    5. Viplav Saini, 2012. "Endogenous asymmetry in a dynamic procurement auction," RAND Journal of Economics, RAND Corporation, vol. 43(4), pages 726-760, December.
    6. Gourvish, Terry, 2002. "British Rail 1974-1997: From Integration to Privatisation," OUP Catalogue, Oxford University Press, number 9780199250059.
    7. Cantillon, Estelle & Pesendorfer, Martin, 2007. "Combination Bidding in Multi-Unit Auctions," CEPR Discussion Papers 6083, C.E.P.R. Discussion Papers.
    8. Amaral, Miguel & Saussier, Stéphane & Yvrande-Billon, Anne, 2009. "Auction procedures and competition in public services: The case of urban public transport in France and London," Utilities Policy, Elsevier, vol. 17(2), pages 166-175, June.
    9. Jofre-Bonet, Mireia & Pesendorfer, Martin, 2000. "Bidding behavior in a repeated procurement auction: A summary," European Economic Review, Elsevier, vol. 44(4-6), pages 1006-1020, May.
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    Cited by:

    1. Barbosa, Klenio & Boyer, Pierre C., 2021. "Discrimination in Dynamic Procurement Design with Learning-by-doing," International Journal of Industrial Organization, Elsevier, vol. 77(C).
    2. Luis Aguiar & Philippe Gagnepain, 2021. "Absorptive Capacity, Knowledge Spillovers and Incentive Contracts," PSE Working Papers halshs-03110851, HAL.
    3. Luis Aguiar & Philippe Gagnepain, 2021. "Absorptive Capacity, Knowledge Spillovers and Incentive Contracts," Working Papers halshs-03110851, HAL.

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    More about this item

    Keywords

    asymmetric auctions; Competition; Dynamic procurement; Incumbency Advantage; local monopoly; staggered contracts; synchronous contracts;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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