Working paper

Allocating essential inputs

Patrick Rey, and David Salant

Abstract

Regulators must often allocate essential inputs, such as spectrum rights, transmission capacity or airport landing slots, which can transform the structure of the downstream market. These decisions involve a trade-off, as provisions aimed at fostering competition and lowering prices for consumers, also tend to limit the proceeds from the sale of the inputs. We first characterize the optimal allocation, from the standpoints of consumer and total welfare. We then note that standard auctions yield substantially different outcomes. Finally, we show how various regulatory instruments can be used to implement the desired allocation.

Keywords

Auctions; Market design; Essential inputs; Regulation; Antitrust;

JEL codes

  • D43: Oligopoly and Other Forms of Market Imperfection
  • D44: Auctions
  • D47: Market Design
  • D61: Allocative Efficiency • Cost–Benefit Analysis
  • L13: Oligopoly and Other Imperfect Markets
  • L42: Vertical Restraints • Resale Price Maintenance • Quantity Discounts
  • L43: Legal Monopolies and Regulation or Deregulation
  • L51: Economics of Regulation

Reference

Patrick Rey, and David Salant, Allocating essential inputs, TSE Working Paper, n. 17-820, June 2017, revised February 2018.

See also

Published in

TSE Working Paper, n. 17-820, June 2017, revised February 2018