Non-Cooperative Entry Deterrence in License Auctions: Dynamic Versus Sealed Bid

27 Pages Posted: 4 Jun 2010

See all articles by Gopal Das Varma

Gopal Das Varma

affiliation not provided to SSRN

Giuseppe Lopomo

Fuqua School - Duke University; Duke University - Department of Economics

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.

Suggested Citation

Varma, Gopal Das and Lopomo, Giuseppe, Non-Cooperative Entry Deterrence in License Auctions: Dynamic Versus Sealed Bid. The Journal of Industrial Economics, Vol. 58, Issue 2, pp. 450-476, June 2010. Available at SSRN: https://ssrn.com/abstract=1615801 or http://dx.doi.org/10.1111/j.1467-6451.2010.00415.x

Gopal Das Varma (Contact Author)

affiliation not provided to SSRN ( email )

No Address Available

Giuseppe Lopomo

Fuqua School - Duke University ( email )

Box 90097
Durham, NC 27708-0097
United States
(919) 660-7820 (Phone)
(919) 660-7971 (Fax)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

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