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License Prices for Financially Constrained Firms

AuthorsBurguet, Roberto ; McAfee, R. Preston
Auction prices
Service deployment
Consumer surplus
Issue Date2-Jun-2008
SeriesUFAE and IAE Working Papers ; 745.08
AbstractIt is often alleged that high auction prices inhibit service deployment. We investigate this claim under the extreme case of financially constrained bidders. If demand is just slightly elastic, auctions maximize consumer surplus if consumer surplus is a convex function of quantity (a common assumption), or if consumer surplus is concave and the proportion of expenditure spent on deployment is greater than one over the elasticity of demand. The latter condition appears to be true for most of the large telecom auctions in the US and Europe. Thus, even if high auction prices inhibit service deployment, auctions appear to be optimal from the consumers' point of view.
Description36 pages, 1 figure.-- Trabajo publicado como artículo en Journal of Regulatory Economics 36(2): 178-198 (2009).-- http://dx.doi.org/10.1007/s11149-009-9092-5
Publisher version (URL)http://pareto.uab.es/wp/2008/74508.pdf
Appears in Collections:(IAE) Informes y documentos de trabajo
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