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On the benefits of set-asides

Author

Listed:
  • Laurent Lamy

    () (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

  • Philippe Jehiel

    (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

Abstract

Set-asides programs which consist in forbidding access to specific participants are commonly used in procurement auctions. We show that when the set of potential participants is composed of an incumbent (who bids for sure if allowed to) and of entrants who show up endogenously (in such a way that their expected rents are fixed by outside options), then it is always beneficial to exclude the incumbent in the second-price auction. This exclusion principle carries over to other auction formats that favor the incumbent and also to some environments with multiple incumbents. Whether it could be beneficial to exclude some kinds of entrants is also addressed. Various applications are discussed.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Laurent Lamy & Philippe Jehiel, 2017. "On the benefits of set-asides," Post-Print hal-01688261, HAL.
  • Handle: RePEc:hal:journl:hal-01688261
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01688261
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    References listed on IDEAS

    as
    1. Matthew Gentry & Tong Li, 2014. "Identification in Auctions With Selective Entry," Econometrica, Econometric Society, vol. 82(1), pages 315-344, January.
    2. Hofbauer, Josef & Sorger, Gerhard, 1999. "Perfect Foresight and Equilibrium Selection in Symmetric Potential Games," Journal of Economic Theory, Elsevier, vol. 85(1), pages 1-23, March.
    3. Jeremy Bulow & Paul Klemperer, 2009. "Why Do Sellers (Usually) Prefer Auctions?," American Economic Review, American Economic Association, vol. 99(4), pages 1544-75, September.
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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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