Working Paper: CEPR ID: DP13461
Authors: Elisabetta Iossa; Patrick Rey; Michael Waterson
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: dynamic procurement; incumbency advantage; local monopoly; competition; asymmetric auctions; synchronous contracts; staggered contracts
JEL Codes: D44; D47; H40; H57; L43; L51; R48
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| monopolization is expected (L12) | synchronous tendering is preferable (H57) |
| synchronous tendering is preferable (H57) | competitive pressure on the monopolist from entrants (L12) |
| synchronous contracts facilitate competition from potential entrants (L14) | lower prices (P22) |
| other firms remain active (L19) | staggered tendering is preferable (H57) |
| staggered tendering is preferable (H57) | maximizes competitive pressure among existing firms (L11) |