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Incumbency and Entry in Licence Auctions: The Anglo-Dutch Auctions Meets other Simple Alternatives

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  • Helmuts Äzacis
  • Roberto Burguet

Abstract

The existence of ex-ante strong incumbents is a barrier to entry in auctions for goods such as licenses. Introducing inefficiencies that favor entrants is a way to induce entry and thus create competition. Designs such as the Anglo-Dutch auction have been proposed with this goal in mind. We first show that indeed the Anglo-Dutch auction fosters entry and increases the revenues of the seller. However, we argue that a more effective way could be to stage the allocation of the good so that each stage reveals information about the participants. We show that a sequence of English auctions, with high reserve prices in early rounds, is a procedure with this property that is more efficient than any one-stage entry auction. Moreover, it also dominates the Anglo-Dutch auction in terms of seller's revenues.

Suggested Citation

  • Helmuts Äzacis & Roberto Burguet, 2005. "Incumbency and Entry in Licence Auctions: The Anglo-Dutch Auctions Meets other Simple Alternatives," Working Papers 223, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:223
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    References listed on IDEAS

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    1. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721, October.
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    Cited by:

    1. Daniel Marszalec, 2016. "Revisiting the Anglo-Dutch Auction," CIRJE F-Series CIRJE-F-1021, CIRJE, Faculty of Economics, University of Tokyo.
    2. Gary Madden & Erik Bohlin & Thien Tran & Aaron Morey, 2014. "Spectrum Licensing, Policy Instruments and Market Entry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(3), pages 277-298, May.
    3. van Bochove, Christiaan & Boerner, Lars & Quint, Daniel, 2012. "Anglo-Dutch premium auctions in eighteenth-century Amsterdam," Discussion Papers 2012/3, Free University Berlin, School of Business & Economics.
    4. Gary Madden & Aaron Morey & Erik Bohlin, 2012. "Regulator Incentives and Third Generation National Mobile Telecommunications Market Entry," Chapters, in: Gerald R. Faulhaber & Gary Madden & Jeffrey Petchey (ed.), Regulation and the Performance of Communication and Information Networks, chapter 11, Edward Elgar Publishing.

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