Wednesday, July 24, 2019

Organizing Competition for the Market

By: Iossa, Elisabetta (University of Rome Tor Vergata, GREEN-Bocconi and EIEF); Rey, Patrick (University of Toulouse); Waterson, Michael (University of Warwick)
Abstract: The paper studies competition for the market in a setting where incumbents (and, to a lesser extent, neighboring incumbents) benefit from a cost advantage. The paper first compares the outcome of staggered and synchronous tenders, before drawing the implications for market design. We find that the timing of tenders should depend on the likelihood of monopolization. When monopolization is expected, synchronous tendering is preferable, as it strengthens the pressure that entrants exercise on the monopolist. When instead other firms remain active, staggered tenderingis preferable, asitmaximizesthe competitivepressure that comes from the other firms.

| Permalink


Post a comment