Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/87359 
Year of Publication: 
2012
Series/Report no.: 
Tinbergen Institute Discussion Paper No. 12-087/VIII
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
This paper investigates regulation by auctions of private supply of congestible infrastructures in two networks settings: 1) two serial facilities, where the consumer has to use both in order to consume; and 2) two parallel facilities that are imperfect substitutes. There are four market structures: a monopoly and 3 duopolies that differ in how firms interact. The effects of an auction depend on what the bidders compete. With a transfer auction, the bidders compete on how much money they transfer to the government. This auction leads to the same outcome as the game without an auction (for a given market structure), since this gives the maximum profit to transfer. An auction on the capacity of a facility leads to an even lower welfare than no auction, because firms set very high capacities and usage fees. Conversely, an auction on the generalised price or number of users leads to the first-best outcome. Moreover, these two auctions are robust: they attain the first-best regardless of whether the facilities are auctioned off to a single firm or to two, and for all market and network structures. On the contrary, the performances (relative to the first-best) of the transfer and capacity auctions strongly depend on these considerations.
Subjects: 
private supply
congestible facilities
auctions
serial facilities
parallel facilities
imperfect substitutes
JEL: 
D43
L13
L51
R41
R42
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
331.92 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.