VARMA, GD; LOPOMO, G, NON-COOPERATIVE ENTRY DETERRENCE IN LICENSE AUCTIONS: DYNAMIC VERSUS SEALED BID -super-* ,
The Journal of Industrial Economics, vol. 58 no. 2
(June, 2010),
pp. 450-476
(last updated on 2024/04/19)
Abstract: We examine the impact of potential entry
on incumbent bidding behavior in license auctions, in both dynamic and
sealed bid formats. Unlike sealed bid auctions, dynamic auctions reveal
information about the identities of potential winners and allow bidders to
revise their bids. This helps incumbents to coordinate their entry
deterrence efforts. If entry is sufficiently costly for each incumbent,
only the dynamic auction has an equilibrium where entry is deterred for
sure. Numerical calculations suggest that, regardless of how costly entry
is for each incumbent, sealed bid auctions can generate a higher
probability of entry as well as a more efficient allocation. Copyright 2010 The Authors. Journal compilation 2010 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.
