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On the benefits of set-asides

Philippe Jehiel () and Laurent Lamy
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Laurent Lamy: CIRED - Centre International de Recherche sur l'Environnement et le Développement - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - EHESS - École des hautes études en sciences sociales - AgroParisTech - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement

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Abstract: Set-asides programs consist in forbidding access to specific participants, and they are commonly used in procurement auctions. We show that when the set of potential participants is composed of an incumbent (who bids for sure if allowed to) and of entrants who show up endogenously (in such a way that their expected rents are fixed by outside options), then it is always beneficial for revenues to exclude the incumbent in the second-price auction. This exclusion principle is generalized to auction formats that favor the incumbent in the sense that he would always gets the good when he values it most. By contrast, set-asides need not be desirable if the incumbent's payoff is included into the seller's objective or in environments with multiple incumbents. Various applications are discussed.

Keywords: set-asides; entry restrictions; auctions with endogenous entry; entry deterrence; asymmetric buyers; incumbents; government procurement; procurement competition policy (search for similar items in EconPapers)
Date: 2017-07
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01557657
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Related works:
Working Paper: On the benefits of set-asides (2017) Downloads
Working Paper: On the benefits of set-asides (2017)
Working Paper: On the benefits of set-asides (2017) Downloads
Working Paper: On the benefits of set-asides (2016) Downloads
Working Paper: On the benefits of set-asides (2016)
Working Paper: On the benefits of set-asides (2016)
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