Tender Auctions with Existing Operators Bidding

Vincent van den Berg

No 13-117/VIII, Tinbergen Institute Discussion Papers from Tinbergen Institute

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.

Keywords: Tender auction; existing operators; Advantaged bidder; Price auction (search for similar items in EconPapers)
JEL-codes: D43 D44 L13 L51 (search for similar items in EconPapers)
Date: 2013-08-15
New Economics Papers: this item is included in nep-com and nep-tre
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Journal Article: Tender auctions with existing operators bidding (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20130117

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