License Auctions and Market Structure

Journal of Economics & Management Strategy, Vol. 15, pp. 371-396, Summer 2006

26 Pages Posted: 8 May 2006

See all articles by Heidrun C. Hoppe-Wewetzer

Heidrun C. Hoppe-Wewetzer

University of Hannover - Department of Economics; and CEPR

Philippe Jehiel

University College London - Department of Economics; Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS); Centre for Economic Policy Research (CEPR)

Benny Moldovanu

University of Bonn - Chair of Economic Theory II; Centre for Economic Policy Research (CEPR)

Abstract

We analyze the interplay between license auctions and market structure in a model with several incumbents and several potential entrants. The focus is on the competitiveness induced by the number of auctioned licenses. Under plausible conditions, we show that auctioning more licenses need not result in a more competitive final outcome, contrary to what common sense suggests. This is due to the nature of competition among incumbents, which sometimes exhibits free-riding. We illustrate some results with examples drawn from the recent European license-auctions for third generation (3G) mobile telephony. We analyze the interplay between license auctions and market structure in a model with several incumbents and several potential entrants. The focus is on the competitiveness induced by the number of auctioned licenses. Under plausible conditions, we show that auctioning more licenses need not result in a more competitive final outcome, contrary to what common sense suggests. This is due to the nature of competition among incumbents, which sometimes exhibits free-riding. We illustrate some results with examples drawn from the recent European license-auctions for third generation (3G) mobile telephony.

Suggested Citation

Hoppe-Wewetzer, Heidrun C. and Jehiel, Philippe and Moldovanu, Benny, License Auctions and Market Structure . Journal of Economics & Management Strategy, Vol. 15, pp. 371-396, Summer 2006, Available at SSRN: https://ssrn.com/abstract=899188 or http://dx.doi.org/10.1111/j.1530-9134.2006.00104.x

Heidrun C. Hoppe-Wewetzer

University of Hannover - Department of Economics; and CEPR ( email )

Koenigsworther Platz 1
30167 Hannover
Germany

HOME PAGE: http://www.mik.uni-hannover.de

Philippe Jehiel

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS) ( email )

28, rue des Saints-Peres
75007 Paris
France
+33 1 4458 2873 (Phone)
+33 1 4458 2880 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Benny Moldovanu

University of Bonn - Chair of Economic Theory II ( email )

Lennestrasse 37
53113 Bonn
Germany
+49 228 736395 (Phone)
+49 228 737940 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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