Affiliation:
1. University of Rome Tor Vergata, GREEN-Bocconi
2. Toulouse School of Economics, University of Toulouse
3. University of Warwick, UK
Abstract
Abstract
We study competition for the market in a setting where incumbents (and, to a lesser extent, neighbouring incumbents) benefit from a cost or information advantage. We first compare the outcome of staggered and synchronous tenders, before drawing the implications for market design. We find the timing of tenders interrelates with the likelihood of monopolisation. For high incumbency advantages and/or discount factors, monopolisation is expected, in which case synchronous tendering is preferable as it strengthens the pressure that entrants exercise on the monopolist. For low incumbency advantages and/or discount factors, other firms remain active, in which case staggered tendering is preferable as it maximises competitive pressure coming from the other firms. We use bus tendering in London to illustrate our insights and draw policy implications.
Publisher
Oxford University Press (OUP)
Subject
General Economics, Econometrics and Finance
Cited by
2 articles.
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