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Firm Behavior in Franchise Monopoly Markets

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  • Robin A. Prager

Abstract

This article presents empirical evidence concerning the value of franchise bidding competition as a means of controlling natural monopoly behavior. The analysis focuses on the cable television industry, using data collected in a survey of local government officials in cabled communities throughout the continental United States. One important potential problem raised by critics of franchise bidding is the ability of franchise winners to engage in ex post opportunistic behavior by reneging on the promises that they made in order to win the franchise contract. The results of my analysis suggest that although franchise competition does lead firms to engage in some degree of opportunistic behavior, the extent of opportunism is not severe. Furthermore, reputation effects appear to play a role in constraining firm behavior, while rate regulation actually seems to exacerbate ex post behavioral problems.

Suggested Citation

  • Robin A. Prager, 1990. "Firm Behavior in Franchise Monopoly Markets," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 211-225, Summer.
    • Handle: RePEc:rje:randje:v:21:y:1990:i:summer:p:211-225
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    Cited by:

    1. Eshien Chong & Carine Staropoli & Anne Yvrande-Billon, 2014. "Auction versus Negotiation in Public Procurement: Looking for Empirical Evidence," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00512813, HAL.
    2. Freddy Huet & Simon Porcher, 2013. "Innovation and regulatory outcomes: evidence from the public-private contracts for water supply in France," Chapters, in: Mehmet Ugur (ed.), Governance, Regulation and Innovation, chapter 9, pages 216-236, Edward Elgar Publishing.
    3. Austan Goolsbee & Amil Petrin, 2001. "The Consumer Gains from Direct Broadcast Satellites and the Competition with Cable Television," NBER Working Papers 8317, National Bureau of Economic Research, Inc.
    4. Luc Baumstark & Claude Ménard & William Roy & Anne Yvrande-Billon, 2005. "Modes de gestion et efficience des opérateurs dans le secteur des transports urbains de personnes," Post-Print halshs-00103116, HAL.
    5. Baldwin, Gordon G., 1991. "Servicing Thin Airline Markets in a Deregulated Environment," Transportation Research Forum Proceedings 1990s 319058, Transportation Research Forum.
    6. Amaral, Miguel, 2008. "Public vs private management of public utilities - The case of urban public transport in Europe," Research in Transportation Economics, Elsevier, vol. 22(1), pages 85-90, January.
    7. Yasuji Otsuka, 1999. "Another Look at Local Franchise Regulation and State Commission Regulation: Do They Really Matter?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 15(4), pages 341-356, December.
    8. Anne Yvrande‐Billon, 2006. "The Attribution Process Of Delegation Contracts In The French Urban Public Transport Sector: Why Competitive Tendering Is A Myth," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 77(4), pages 453-478, December.
    9. Michael Ball & Paul Cheshire & Christian A. L. Hilber & Xiaolun Yu, 2024. "Why delay? Understanding the construction lag, aka the build out rate," CEP Discussion Papers dp1990, Centre for Economic Performance, LSE.
    10. Hakam Kamleh, 2005. "La nouvelle organisation ferroviaire britannique : sur la frontière entre intégration et désintégration," CAE Working Papers 28, Aix-Marseille Université, CERGAM.
    11. Nicolas Dupas & Frédéric Marty & Arnaud Voisin, 2011. "Partnership contracts, project finance and information asymmetries: from competition for the contract to competition within the contract?," Post-Print halshs-00202327, HAL.
    12. Gregory S. Crawford, 2014. "Cable Regulation in the Internet Era," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 137-193, National Bureau of Economic Research, Inc.

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