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License Auctions and Market Structure
Author(s) -
Hoppe Heidrun C.,
Jehiel Philippe,
Moldovanu Benny
Publication year - 2006
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1530-9134.2006.00104.x
Subject(s) - common value auction , license , competition (biology) , outcome (game theory) , market structure , focus (optics) , microeconomics , industrial organization , business , economics , computer science , ecology , physics , optics , biology , operating system
We analyze the interplay between license auctions and market structure in a model with several incumbents and several potential entrants. The focus is on the competitiveness induced by the number of auctioned licenses. Under plausible conditions, we show that auctioning more licenses need not result in a more competitive final outcome, contrary to what common sense suggests. This is due to the nature of competition among incumbents, which sometimes exhibits free‐riding. We illustrate some results with examples drawn from the recent European license‐auctions for third generation (3G) mobile telephony.