Do Auctions and Forced Divestitures increase Competition?

Adriaan Soetevent, Marco Haan and Pim Heijnen

No 08-117/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This discussion paper resulted in an article in the 'Journal of Industrial Economics' (2014). Volume 62, issue 3, pages 467-502.

To foster competition, governments can intervene by auctioning licenses to operate, or by imposing divestitures. The Dutch government has done exactly that, organizing auctions to redistribute tenancy rights for highway gasoline stations and imposing divestitures of such stations on the four major companies. We evaluate this policy experiment and find that the auctioning of licenses without an obligation to divest has no discernible effect on prices. An obligation to divest lowers prices by 1.3–2.3% at divested sites. Moreover, prices decrease by 0.9–1.2% at sites nearby. This suggests that the observed price decreases are at least partly due to competitive spillovers.

Keywords: Divestitures; Auctions; Entry; Policy Evaluation (search for similar items in EconPapers)
JEL-codes: D43 D44 L11 (search for similar items in EconPapers)
Date: 2008-12-08, Revised 2011-08-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20080117

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