Does Auctioning of Entry Licences Affect Consumers Prices? An Experimental Study

T.J.S. Offerman, J.J.M. Potters

Research output: Working paperDiscussion paperOther research output

302 Downloads (Pure)

Abstract

On an increasing scale auctions are used to allocate the licenses to operate on markets which are thought not suited for free entry.According to standard economic arguments, the license fees paid at the auction will not affect consumer prices since they constitute a sunk cost.This standard view is not uncontested though.In the present paper we experimentally investigate two arguments for a potential upward effect of auctioning of prices: the incorporation of entry fees in prices due to the use of mark-up pricing rules, and the tendency of auctions to select the more collusive firms.Our results indicate that auctioning increases the probability of high prices, and that this is mainly due to the use of mark-up pricing rules.
Original languageEnglish
Place of PublicationTilburg
PublisherMicroeconomics
Number of pages45
Volume2000-53
Publication statusPublished - 2000

Publication series

NameCentER Discussion Paper
Volume2000-53

Fingerprint

Auctions
Experimental study
License
Consumer prices
Pricing rules
Fees
Mark-up pricing
Free entry
Economics
Sunk costs

Cite this

Offerman, T. J. S., & Potters, J. J. M. (2000). Does Auctioning of Entry Licences Affect Consumers Prices? An Experimental Study. (CentER Discussion Paper; Vol. 2000-53). Tilburg: Microeconomics.
Offerman, T.J.S. ; Potters, J.J.M. / Does Auctioning of Entry Licences Affect Consumers Prices? An Experimental Study. Tilburg : Microeconomics, 2000. (CentER Discussion Paper).
@techreport{bf98ad9e67004de38697bdee340e54ce,
title = "Does Auctioning of Entry Licences Affect Consumers Prices? An Experimental Study",
abstract = "On an increasing scale auctions are used to allocate the licenses to operate on markets which are thought not suited for free entry.According to standard economic arguments, the license fees paid at the auction will not affect consumer prices since they constitute a sunk cost.This standard view is not uncontested though.In the present paper we experimentally investigate two arguments for a potential upward effect of auctioning of prices: the incorporation of entry fees in prices due to the use of mark-up pricing rules, and the tendency of auctions to select the more collusive firms.Our results indicate that auctioning increases the probability of high prices, and that this is mainly due to the use of mark-up pricing rules.",
author = "T.J.S. Offerman and J.J.M. Potters",
note = "Pagination: 45",
year = "2000",
language = "English",
volume = "2000-53",
series = "CentER Discussion Paper",
publisher = "Microeconomics",
type = "WorkingPaper",
institution = "Microeconomics",

}

Offerman, TJS & Potters, JJM 2000 'Does Auctioning of Entry Licences Affect Consumers Prices? An Experimental Study' CentER Discussion Paper, vol. 2000-53, Microeconomics, Tilburg.

Does Auctioning of Entry Licences Affect Consumers Prices? An Experimental Study. / Offerman, T.J.S.; Potters, J.J.M.

Tilburg : Microeconomics, 2000. (CentER Discussion Paper; Vol. 2000-53).

Research output: Working paperDiscussion paperOther research output

TY - UNPB

T1 - Does Auctioning of Entry Licences Affect Consumers Prices? An Experimental Study

AU - Offerman, T.J.S.

AU - Potters, J.J.M.

N1 - Pagination: 45

PY - 2000

Y1 - 2000

N2 - On an increasing scale auctions are used to allocate the licenses to operate on markets which are thought not suited for free entry.According to standard economic arguments, the license fees paid at the auction will not affect consumer prices since they constitute a sunk cost.This standard view is not uncontested though.In the present paper we experimentally investigate two arguments for a potential upward effect of auctioning of prices: the incorporation of entry fees in prices due to the use of mark-up pricing rules, and the tendency of auctions to select the more collusive firms.Our results indicate that auctioning increases the probability of high prices, and that this is mainly due to the use of mark-up pricing rules.

AB - On an increasing scale auctions are used to allocate the licenses to operate on markets which are thought not suited for free entry.According to standard economic arguments, the license fees paid at the auction will not affect consumer prices since they constitute a sunk cost.This standard view is not uncontested though.In the present paper we experimentally investigate two arguments for a potential upward effect of auctioning of prices: the incorporation of entry fees in prices due to the use of mark-up pricing rules, and the tendency of auctions to select the more collusive firms.Our results indicate that auctioning increases the probability of high prices, and that this is mainly due to the use of mark-up pricing rules.

M3 - Discussion paper

VL - 2000-53

T3 - CentER Discussion Paper

BT - Does Auctioning of Entry Licences Affect Consumers Prices? An Experimental Study

PB - Microeconomics

CY - Tilburg

ER -

Offerman TJS, Potters JJM. Does Auctioning of Entry Licences Affect Consumers Prices? An Experimental Study. Tilburg: Microeconomics. 2000. (CentER Discussion Paper).