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.
Dynamic procurement; incumbency advantage; local monopoly; competition; asymmetric auctions; synchronous contracts; staggered contracts;
- D44: Auctions
- D47: Market Design
- H40: General
- H57: Procurement
- L43: Legal Monopolies and Regulation or Deregulation
- L51: Economics of Regulation
- R48: Government Pricing and Policy
Elisabetta Iossa, Patrick Rey, and Michael Waterson, “Organizing Competition for the Market”, TSE Working Paper, n. 19-984, January 2019.
Elisabetta Iossa, Patrick Rey, and Michael Waterson, “Organising Competition for the Market”, Journal of the European Economic Association, vol. 20, n. 2, April 2022, p. 822–868.
Journal of the European Economic Association, vol. 20, n. 2, April 2022, p. 822–868