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Collusion in Beauty Contests

Author

Listed:
  • Achim Wambach

Abstract

During the recent sales of UMTS licenses in Europe some countries used auctions while others resorted to so-called Beauty Contests. There seems to be a wide consensus among economists that in these and other contexts like privatisation an auction is the better selling mechanism. However, why exactly an auction should be preferred is unclear. Here we present an argument why beauty contests or negotiations might be dominated by auctions, which is closely linked to the multi dimensionality on issues involved in this process. The important assumption we make is that bidding firms do not know the preferences of the government. As a consequence, during a beauty contest participants are uncertain about the final decision of the government. This uncertainty enables firms to collude.

Suggested Citation

  • Achim Wambach, 2002. "Collusion in Beauty Contests," CESifo Working Paper Series 724, CESifo.
    • Handle: RePEc:ces:ceswps:_724
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    File URL: https://www.cesifo.org/DocDL/724.pdf
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    Cited by:

    1. Lukach, R. & Plasmans, J.E.J., 2002. "Measuring Knowledge Spillovers using Patent Citations : Evidence from the Belgian Firm's Data," Other publications TiSEM d78bf59a-e0ff-4451-86b9-1, Tilburg University, School of Economics and Management.

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