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Do Auctions and Forced Divestitures Increase Competition? Evidence for Retail Gasoline Markets
Author(s) -
Soetevent Adriaan R.,
Haan Marco A.,
Heijnen Pim
Publication year - 2014
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/joie.12054
Subject(s) - divestment , competition (biology) , common value auction , industrial organization , business , monetary economics , obligation , economics , microeconomics , market economy , finance , ecology , political science , law , biology
To foster competition, governments can intervene by auctioning licenses to operate, or by imposing divestitures. The D utch government has done exactly that, organizing auctions to redistribute tenancy rights for highway gasoline stations and imposing divestitures of such stations on the four major companies. We evaluate this policy experiment and find that the auctioning of licenses without an obligation to divest has no discernible effect on prices. An obligation to divest lowers prices by 1.3–2.3% at divested sites. Moreover, prices decrease by 0.9–1.2% at sites nearby. This suggests that the observed price decreases are at least partly due to competitive spillovers.