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Non‐Cooperative Entry Deterrence In License Auctions: Dynamic Versus Sealed Bid

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  • GOPAL DAS VARMA
  • GIUSEPPE LOPOMO

Abstract

We examine the impact of potential entry on incumbent bidding behavior in license auctions, in both dynamic and sealed bid formats. Unlike sealed bid auctions, dynamic auctions reveal information about the identities of potential winners and allow bidders to revise their bids. This helps incumbents to coordinate their entry deterrence efforts. If entry is sufficiently costly for each incumbent, only the dynamic auction has an equilibrium where entry is deterred for sure. Numerical calculations suggest that, regardless of how costly entry is for each incumbent, sealed bid auctions can generate a higher probability of entry as well as a more efficient allocation.

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  • Gopal Das Varma & Giuseppe Lopomo, 2010. "Non‐Cooperative Entry Deterrence In License Auctions: Dynamic Versus Sealed Bid," Journal of Industrial Economics, Wiley Blackwell, vol. 58(2), pages 450-476, June.
    • Handle: RePEc:bla:jindec:v:58:y:2010:i:2:p:450-476
    DOI: 10.1111/j.1467-6451.2010.00415.x
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    2. Brown, David P., 2018. "The effect of subsidized entry on capacity auctions and the long-run resource adequacy of electricity markets," Energy Economics, Elsevier, vol. 70(C), pages 205-232.
    3. Burkett, Justin, 2018. "Information disclosure in auctions with downstream competition," Economics Letters, Elsevier, vol. 163(C), pages 22-26.

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