Auctioning Monopoly Franchises: Award Criteria and Service Launch Requirements

30 Pages Posted: 29 Jun 2009

See all articles by Michele Moretto

Michele Moretto

University of Padua, Dep of Economics and Management

Cesare Dosi

University of Padua - Department of Economics; CRIEP - Centro Universitario di Ricerca sull’Economia Pubblica

Date Written: June 24, 2009

Abstract

We study the competition to acquire the exclusive right to operate an infrastructure service, by comparing two different specifications for the financial proposals - 'lowest price to consumers' vs 'highest concession fee', and two alternative contractual arrangements: a contract which imposes the obligation to immediately undertake the investment required to operate the concessioned service and a contract which simply assigns to the winning bidder the right to supply the market at a date of her choosing. By comparing the returns of these alternative award criteria and concessioning conditions, we show that concessioning without imposing rollout time limits may or may not provide a higher expected social value, depending on the bidding rule used to allocate the contract. In turn, the relative advantages of each award criterion are affected by the concessioning conditions.

Keywords: concessions, auctions, award criteria, service rollout time limits

JEL Classification: L51, D44, D92

Suggested Citation

Moretto, Michele and Dosi, Cesare, Auctioning Monopoly Franchises: Award Criteria and Service Launch Requirements (June 24, 2009). FEEM Working Paper No. 23.2009. Available at SSRN: https://ssrn.com/abstract=1425009 or http://dx.doi.org/10.2139/ssrn.1425009

Michele Moretto (Contact Author)

University of Padua, Dep of Economics and Management ( email )

via Del Santo 33
Padova, 35123
Italy
+39 049 8274265 (Phone)
+39 049 8274211 (Fax)

Cesare Dosi

University of Padua - Department of Economics; CRIEP - Centro Universitario di Ricerca sull’Economia Pubblica ( email )

via Del Santo 33
Padova, 35123
Italy
049+8274049 (Phone)
049+8274221 (Fax)

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