License Auctions and Market Structure
We analyze 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 licenses. 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. If the number of incumbents is greater than the number of new licenses, we show that auctioning more licenses need not result in greater competitiveness. If the number of licenses exceeds the number of incumbents, we display plausible conditions under which all incumbents get a license. Finally, we suggest a positive role for some auction formats in which the number of licenses is endogenously determined at the auction. We illustrate some results with examples drawn from European license auctions for 3G mobile telephony.
|Date of creation:||19 Sep 2000|
|Note:||We are grateful for many helpful comments made by the participants at the conference ”Auctions and Market Structure” ,organized by the University of Mannheim, July 2000. Jehiel: ENPC, CERAS, 28 rue des Saints-Peres, 75007 Paris and UCL, London; firstname.lastname@example.org; Moldovanu: Department of Economics, University of Mannheim, 68131 Mannheim; email@example.com|
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