An auction of transport capacity can only roll forward if competitive bidders show up at the start. To characterize bidding behavior, we develop a model with a single incumbent potentially in competition with a single challenger; should the challenger obtain slots, the two ﬁrms will engage post-auction in capacity con-strained price competition. We show how the auction structure, that is, whether the slots are auctioned one at a time, and if not, how they are packaged aﬀects the outcome. Our key ﬁnding is that the division of the available slots into tranches can signiﬁcantly aﬀect the outcome of the auction. Absent any set-asides, a single auc-tion for all the slots will almost certainly be won by an incumbent. Set-asides can enable the challenger to win one or more packages of slots. Further, when the slots are split up, and auctioned one-at-a-time or in batches, a challenger’s prospects improve signiﬁcantly, and no longer rely only on set-asides. The implications of our analysis are (a) the outcome will depend crucially on auction design decisions,(b) set-asides for challengers can help and (c) an auction that results in successful entry by challengers may result in reduced auction revenues and industry proﬁts.
Rail transportation; Open access; Auctions; Regulation;
- D40: General
- L12: Monopoly • Monopolization Strategies
- L13: Oligopoly and Other Imperfect Markets
- L40: General
- L92: Railroads and Other Surface Transportation
Frédéric Cherbonnier, David Salant, and Karine Van Der Straeten, “Getting auctions for transportation capacity to roll”, TSE Working Paper, n. 21-1254, September 2021.
TSE Working Paper, n. 21-1254, September 2021