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Author: | Janssen, M.C.W. Karamychev, V.A. |
Title: | Do auctions select efficient firms? |
Journal: | Economic Journal
2010 : DEC, VOL 120:549 p. 1319-1344 |
Index terms: | costs COMPANIES auctions markets efficiency government |
Language: | eng |
Abstract: | This article considers a government auctioning off multiple licences to firms that compete in an aftermarket. Firms have different costs, and cost-efficiency is private information in the auction and in the aftermarket. If only one licence is auctioned, standard results say that the most efficient firm wins the auction as it has the highest valuation for the licence. The conditions under which this result does and does not generalise to the case of auctioning multiple licences and aftermarket competition are analysed. Strategic interaction in the aftermarket is responsible for the fact that auctions may select inefficient firms. |
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