Yardstick competition, franchise bidding and firms' incentives to collude - Archive ouverte HAL Access content directly
Journal Articles Review of Industrial Organization Year : 2009

Yardstick competition, franchise bidding and firms' incentives to collude

(1) , (2)
1
2
Chong Eshien
  • Function : Author
Freddy Huet

Abstract

Collusion seems to be a pervasive problem when regional monopoly rights are auctioned to private firms. This leads us to study whether firms may collude if the regulator uses yardstick competition to simulate competitive forces, and how this is affected when both schemes are used. Using an infinitely repeated game framework, we find that collusion is sustainable when firms are sufficiently patient under yardstick competition. An additional franchise bidding mechanism can even help firms sustain collusion when they are impatient. When temporary monopoly rights are assigned for sufficiently long periods of time, collusion may not be sustainable even when firms are patient.
Not file

Dates and versions

halshs-00479475 , version 1 (30-04-2010)

Identifiers

  • HAL Id : halshs-00479475 , version 1

Cite

Chong Eshien, Freddy Huet. Yardstick competition, franchise bidding and firms' incentives to collude. Review of Industrial Organization, 2009, 35 (1), pp.149-169. ⟨halshs-00479475⟩
109 View
0 Download

Share

Gmail Facebook Twitter LinkedIn More