Debiasing Through Auction? Inertia in the Liberalization of Retail Markets
University of Pavia - Department of Political Economy and Quantitative Methods
Bocconi University - IEFE
January, 26 2012
IEFE Center for Research on Energy and Environmental Economics and Policy Working Paper No. 47
We analize a market in the process of liberalization. Consumers are biased in favor of the incumbent firm and we assume that they can discover the true value of new suppliers only by switching. In an infinitely repeated game setting with Bertrand competition, we first show that efficient entry might not take place. We then evaluate the effect of organizing a public auction for assigning consumers to a “default supplier” and show that such a mechanism (which respects the freedom of choice by consumers) would support entry efficiency. However, auctioning might also increase inefficient, although temporary, entry.
Number of Pages in PDF File: 18
Keywords: electricity retail, default supplier, entry, competition policy, universal service
JEL Classification: D43, L13, L94working papers series
Date posted: January 26, 2012
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