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Auctions, Entry Deterrence and Divisibility of the Object for Sale

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Abstract

This paper analyzes entry deterrence strategies at sequential multi-unit English-type repeated auctions, based on entry deterrence observed at a series of yearly auctions of fishing rights occurring since the early 1990s in the Chilean sea bass fishery. It analyzes parametric configurations under which incumbent firms could have followed non-cooperative deterrence strategies or else may have colluded for that purpose. A two-stage competition model is developed. In the first stage there occurs sequential auctioning of multiple fishing rights; in the second stage, production rights are used to compete in a homogeneous-good Cournot market. The analysis focuses on the relationship between the number of incumbents, sources of competitive advantage for them, and the number and size of the rights for sale. The core of the analysis lies in answering how the divisibility of the object(s) for sale affects the possibilities of incumbents to deter new rivals’ entry.

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  • Julio Peña Torres & Gabriel Fernándes Aguirre,, 2010. "Auctions, Entry Deterrence and Divisibility of the Object for Sale," ILADES-Georgetown University Working Papers inv247, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
  • Handle: RePEc:ila:ilades:inv247
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    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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