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Auctions of licences and market structure

Author

Listed:
  • Gustavo E. Rodriguez

    (Division of Social Sciences, Wagner College, Staten Island, NY 10301, USA)

Abstract

This paper studies sequential auctions of licences to participate in a symmetric market game. Assuming that the rate at which industry profits decrease with repeated entry is not too large, at the unique solution either a single firm preempts entry altogether or entry occurs in every stage, depending on the net benefit of complete preemption to an incumbent. If we relax the assumption, a third outcome can occur: two firms may coordinate their choices to avoid further entry. The analysis employs a new refinement of Nash equilibrium, the concept of recursively undominated equilibrium.

Suggested Citation

  • Gustavo E. Rodriguez, 2002. "Auctions of licences and market structure," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 19(2), pages 283-309.
    • Handle: RePEc:spr:joecth:v:19:y:2002:i:2:p:283-309
    Note: Received: February 25, 2000; revised version: September 12, 2000
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    More about this item

    Keywords

    Auctions; Entry preemption; Industrial organization.;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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