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Debiasing Through Auction? Inertia in the Liberalization of Retail MarketsPaolo BertolettiUniversity of Pavia - Department of Political Economy and Quantitative Methods Clara PolettiBocconi University - IEFE January, 26 2012 IEFE Center for Research on Energy and Environmental Economics and Policy Working Paper No. 47 Abstract: 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, L94 working papers seriesDate posted: January 26, 2012Suggested Citation |
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