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License Auctions and Market Structure

Listed author(s):
  • Jehiel, Philippe
  • Moldovanu, Benny

We analyse the interplay between license auctions and market structure in a model with several incumbents and several potential entrants. The focus is on the competitiveness induced by the number of auctioned licences. Moreover, we study how the auction format affects the incentives for explicit or tacit collusion among incumbents. A crucial role is played by the relation between the number of incumbents and the number of licenses. We show that auctioning more licences need not result in greater competitiveness when the number of incumbents is greater than the number of new licences. When the number of licenses exceeds the number of incumbents, we display plausible conditions under which all incumbents get a licence. Finally, we suggest a positive role for some auction formats in which the number of licences is endogenously determined at the auction. We illustrate some results with examples drawn from the German and UK licence auctions for 3G mobile telephony.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2530.

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Date of creation: Aug 2000
Handle: RePEc:cpr:ceprdp:2530
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  1. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, July.
  2. Robert Wilson, 1979. "Auctions of Shares," The Quarterly Journal of Economics, Oxford University Press, vol. 93(4), pages 675-689.
  3. R. Preston McAfee & John McMillan, 1996. "Analyzing the Airwaves Auction," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 159-175, Winter.
  4. Krishna, Kala, 1993. "Auctions with Endogenous Valuations: The Persistence of Monopoly Revisited," American Economic Review, American Economic Association, vol. 83(1), pages 147-160, March.
  5. Sandro Brusco & Giuseppe Lopomo, 1999. "Collusion via Signalling in Open Ascending Auctions with Multiple Objects and Complementarities," Working Papers 99-05, New York University, Leonard N. Stern School of Business, Department of Economics.
  6. McAfee, R Preston & Williams, Michael A, 1992. "Horizontal Mergers and Antitrust Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 181-187, June.
  7. Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-526, June.
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