Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/87459 
Year of Publication: 
2013
Series/Report no.: 
Tinbergen Institute Discussion Paper No. 13-117/VIII
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
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.
Subjects: 
Tender auction
existing operators
Advantaged bidder
Price auction
JEL: 
D43
D44
L13
L51
Document Type: 
Working Paper

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