Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2013-08-15
Number: 13-117/VIII
Author-Name: Vincent A.C. van den Berg
Author-Workplace-Name: VU University Amsterdam
Title: Tender Auctions with Existing Operators Bidding
Abstract: Consider a government tendering a facility, such as an airport or utility, where one bidder owns a competing facility. With a "standard auction"�, this "existing operator"� bids above the auctioned facility's expected profit, as winning means being a monopolist instead of a duopolist. This auction leads to an unregulated outcome which hurts welfare. A consumer-price auction can alleviate this problem. With complementing facilities, the existing operator offers a price below marginal cost and is more likely to win than other bidders; with substitutes, it is less likely to win. Often, the advantaged bidder always wins, eliminating competition for the field.
Classification-JEL: D43, D44, L13, L51
Keywords: Tender auction, existing operators, Advantaged bidder, Price auction
File-Url: https://papers.tinbergen.nl/13117.pdf
File-Format: application/pdf
File-Size: 442021 bytes
Handle: RePEc:tin:wpaper:20130117