Organizing Competition for the Market

68 Pages Posted: 23 Jan 2019

See all articles by Elisabetta Iossa

Elisabetta Iossa

University of Rome Tor Vergata; IEFE Bocconi University; Centre for Economic Policy Research (CEPR)

Patrick Rey

Toulouse School of Economics; Centre for Economic Policy Research (CEPR)

Michael Waterson

University of Warwick - Department of Economics

Date Written: January 2019

Abstract

The paper studies competition for the market in a setting where incumbents (and, to a lesser extent, neighboring incumbents) benefit from a cost advantage. The paper first compares the outcome of staggered and synchronous tenders, before drawing the implications for market design.

We find that the timing of tenders should depend on the likelihood of monopolization. When monopolization is expected, synchronous tendering is preferable, as it strengthens the pressure that entrants exercise on the monopolist. When instead other firms remain active, staggered tendering is preferable, as it maximizes the competitive pressure that comes from the other firms.

Keywords: asymmetric auctions, Competition, Dynamic procurement, Incumbency Advantage, local monopoly, staggered contracts, synchronous contracts

JEL Classification: D44, D47, H40, H57, L43, L51, R48

Suggested Citation

Iossa, Elisabetta and Rey, Patrick and Waterson, Michael, Organizing Competition for the Market (January 2019). CEPR Discussion Paper No. DP13461, Available at SSRN: https://ssrn.com/abstract=3319781

Elisabetta Iossa (Contact Author)

University of Rome Tor Vergata ( email )

Via Columbia n.2
Rome, 00133
Italy

IEFE Bocconi University ( email )

Via Roentgen 1
Milan, Milan 20136
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Patrick Rey

Toulouse School of Economics ( email )

2 Rue du Doyen-Gabriel-Marty
Toulouse, 31042
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Michael Waterson

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom

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