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Auctioning Monopoly Franchises: Award Criteria and Service Launch Requirements

Cesare Dosi and Michele Moretto ()

No 50409, Institutions and Markets Papers from Fondazione Eni Enrico Mattei (FEEM)

Abstract: We study the competition to acquire the exclusive right to operate an infrastructure service, by comparing two different specifications for the financial proposals - "lowest price to consumers" vs "highest concession fee", and two alternative contractual arrangements: a contract which imposes the obligation to immediately undertake the investment required to operate the concessioned service and a contract which simply assigns to the winning bidder the right to supply the market at a date of her choosing. By comparing the returns of these alternative award criteria and concessioning conditions, we show that concessioning without imposing rollout time limits may or may not provide a higher expected social value, depending on the bidding rule used to allocate the contract. In turn, the relative advantages of each award criterion are affected by the concessioning conditions.

Keywords: Public; Economics (search for similar items in EconPapers)
Pages: 30
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemim:50409

DOI: 10.22004/ag.econ.50409

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