Collusion and Predation in Auction Markets
34 Pages Posted: 16 Feb 2001
Date Written: February 2001
The most important issues in auction design are the traditional concerns of competition policy - preventing collusive, predatory, and entry-deterring behaviour. Ascending and uniform-price auctions are particularly vulnerable to these problems, and the Anglo-Dutch auction - a hybrid of the sealed-bid and ascending auctions - may often perform better. Effective anti-trust policy is also critical.
However, everything depends on the details of the context; the circumstances of the recent U.K. mobile-phone license made an ascending format ideal, but this author (and others) correctly predicted the same format would fail in the Netherlands and elsewhere. Auction design is not "one size fits all".
We also discuss the 3G spectrum auctions in Germany, Italy, Austria and Switzerland, and football TV-rights, TV franchise and other radiospectrum auctions, electricity markets, and takeover battles.
[This is a revised and extended version of the paper previously circulated under the title "What Really Matters in Auction Design".]
Keywords: Antitrust, Collusion, Predation, Entry, Entry Deterrence, Auctions, Telecommunications, Takeovers, Electricity, Bidding, Auction Theory, Radiospectrum, UMTS, Mobile Phones, Mechanism Design
JEL Classification: L45, L96, D44, D43, L13
Suggested Citation: Suggested Citation