Auctions, Entry Deterrence and Divisibility of the Object for Sale

Julio Peña Torres () and Gabriel Fernándes Aguirre, ()
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Julio Peña Torres: ILADES-Georgetown University, Universidad Alberto Hurtado
Gabriel Fernándes Aguirre,: Economista miembro de la División Económica, Fiscalía Nacional Económica de Chile

ILADES-UAH Working Papers from Universidad Alberto Hurtado/School of Economics and Business

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.

JEL-codes: D2 D4 Q2 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2010-04
New Economics Papers: this item is included in nep-com and nep-ind
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