Getting auctions for transportation capacity to roll

Frédéric Cherbonnier, David Salant and Karine Van Der Straeten

No 21-1254, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: An auction of transport capacity can only roll forward if competitive bidders show up at the start. To characterize bidding behavior, we develop a model with a single incumbent potentially in competition with a single challenger; should the challenger obtain slots, the two firms will engage post-auction in capacity con-strained price competition. We show how the auction structure, that is, whether the slots are auctioned one at a time, and if not, how they are packaged affects the outcome. Our key finding is that the division of the available slots into tranches can significantly affect the outcome of the auction. Absent any set-asides, a single auc-tion for all the slots will almost certainly be won by an incumbent. Set-asides can enable the challenger to win one or more packages of slots. Further, when the slots are split up, and auctioned one-at-a-time or in batches, a challenger’s prospects improve significantly, and no longer rely only on set-asides. The implications of our analysis are (a) the outcome will depend crucially on auction design decisions,(b) set-asides for challengers can help and (c) an auction that results in successful entry by challengers may result in reduced auction revenues and industry profits.

Keywords: Rail transportation; Open access; Auctions; Regulation (search for similar items in EconPapers)
JEL-codes: D40 L12 L13 L40 L92 (search for similar items in EconPapers)
Date: 2021-10-18
New Economics Papers: this item is included in nep-des, nep-mic, nep-ore, nep-reg and nep-tre
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Working Paper: Getting auctions for transportation capacity to roll (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:126117

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