Entry deterrence and free riding in license auctions: Incumbent heterogeneity and monotonicity
- Authors
- Ju, B.-G.; Yoo, S.H.
- Issue Date
- 19-1월-2022
- Publisher
- De Gruyter Open Ltd
- Keywords
- Asymmetric auctions; Entry deterrence; Free-rider problem
- Citation
- B.E. Journal of Theoretical Economics, v.22, no.1, pp.199 - 231
- Indexed
- SSCI
SCOPUS
- Journal Title
- B.E. Journal of Theoretical Economics
- Volume
- 22
- Number
- 1
- Start Page
- 199
- End Page
- 231
- URI
- https://scholar.korea.ac.kr/handle/2021.sw.korea/135253
- DOI
- 10.1515/bejte-2020-0143
- ISSN
- 1935-1704
- Abstract
- We examine free riding for entry deterrence in license auctions with heterogeneous incumbents. We establish the monotonicity of randomized preemptive bidding equilibria: an incumbent with a higher entry-loss rate has greater free-riding incentive, choosing a lower deterring probability. We then identify conditions for the existence of a series of fully or partially participating equilibria such that two or more incumbents with bounded heterogeneity in their entry-loss rates participate in randomized preemptive bidding. As an application, we examine a simple case of a bipartite group of participating incumbents consisting of one “leader” and many “followers”. We show that the policy of limiting the leader’s participation (set-asides for entrants, limiting participation of incumbents with excessive market shares, etc.) may or may not increase entry probability. © 2021 De Gruyter. All rights reserved.
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