Entry auctions and strategic behavior under cross-market price constraints

Journal Article (Journal Article)

We examine how universal service provisions and price restrictions across markets impact strategic entry and pricing. We develop a simple multi-market model with an oligopolistic (profitable) urban market and entry auctions for (unprofitable) rural service. Cross-market price restrictions induce a firm operating in both markets to become a 'softer' competitor, thus placing the firm at a strategic disadvantage. When we account for entry incentives and strategic bidding, the downstream strategic disadvantage becomes advantageous, leading to higher prices and profits. Price restrictions may also put outside firms, even relatively inefficient ones, at a strategic advantage. © 2002 Elsevier Science B.V. All rights reserved.

Full Text

Duke Authors

Cited Authors

  • Anton, JJ; Vander Weide, JH; Vettas, N

Published Date

  • January 1, 2002

Published In

Volume / Issue

  • 20 / 5

Start / End Page

  • 611 - 629

International Standard Serial Number (ISSN)

  • 0167-7187

Digital Object Identifier (DOI)

  • 10.1016/S0167-7187(01)00055-8

Citation Source

  • Scopus