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Auctions of licences and market structure

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  • Gustavo Rodríguez

Abstract

This paper studies sequential auctions of licences to operate in a market where those firms that obtain at least one licence then engage in a symmetric market game. I employ a new refinement of Nash equilibrium, the concept of {\sl Markovian recursively undominated equilibrium}. The unique solution satisfies the following properties: (i) when several firms own licences before the auction (incumbents), new entrants buy licences in each stage, and (ii) when there is no more than one incumbent, either the single firm preempts entry altogether or entry occurs in every stage, depending on the parameter configuration.

Suggested Citation

  • Gustavo Rodríguez, 1997. "Auctions of licences and market structure," Economics Working Papers 209, Department of Economics and Business, Universitat Pompeu Fabra.
  • Handle: RePEc:upf:upfgen:209
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    File URL: https://econ-papers.upf.edu/papers/209.pdf
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    References listed on IDEAS

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    1. Paul R. Milgrom, 1985. "Auction Theory," Cowles Foundation Discussion Papers 779, Cowles Foundation for Research in Economics, Yale University.
    2. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 267-343, Summer.
    3. 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.
    4. Dasgupta, Partha & Gilbert, Richard & Stiglitz, Joseph, 1983. "Strategic Considerations in Invention and Innovation: The Case of Natural Resources," Econometrica, Econometric Society, vol. 51(5), pages 1439-1448, September.
    5. 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.
    6. Robert J. Weber, 1981. "Multiple-Object Auctions," Discussion Papers 496, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    7. John McMillan, 1994. "Selling Spectrum Rights," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 145-162, Summer.
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    Cited by:

    1. Jehiel, Philippe & Moldovanu, Benny, 2001. "The European UMTS/IMT-2000 Licence Auctions," CEPR Discussion Papers 2810, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Auctions; game theory; industrial organization;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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