Abstract
An auction is a market mechanism which, by means of explicit rules, transfers market players' bids into an allocation of resources. An auction yields an unequivocal result as to which market player gets a specific object at which price. In network sectors auctions have considerable potential as allocation mechanisms for network services (e.g. providing bus services) and for the provision of network infrastructure capacities (e.g. take-off and landing slots on airports). In this context, auctions of public resources, for instance radio frequencies, on the basis of which network infrastructures can be built, are the best known examples. This chapter analyses the network-specific particularities of auctions in network industries.
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Notes
- 1.
- 2.
This type of auction is called Dutch auction because it became famous in the Netherlands for auctions of tulip bulbs.
- 3.
A particular variant of the first-price sealed-bid auction, in which a successful bidder might, in the context of an invitation to tender, under certain conditions be permitted to withdraw his bid is called Swiss auction (cf. von Ungern-Sternberg, 1991).
- 4.
The term Vickrey Auktion goes back to William Vickrey, who wrote essential contributions to auction theory (e.g. Vickrey, 1961).
- 5.
For a more detailed and mathematical analysis the reader is referred to Lipczynski et al. (2005, pp. 389ff. and 704ff.).
- 6.
In the most favourable case the amount of the bid higher than his individual willingness to pay is irrelevant, because the second highest bid is not impacted by it.
- 7.
In the most favourable case the amount of the bid lower than his individual willingness to pay is irrelevant, because the second highest bid is not impacted by it.
- 8.
For the concept of price differentiation see Chap. 4.
- 9.
The role of universal services in network industries is discussed in Chap. 7.
- 10.
The role of market power regulation in network industries is analyzed in Chap. 8.
- 11.
For the role of auctioning of take-off and landing slots in the liberalisation of the aviation value chain see Knieps (2006, p. 22).
- 12.
For the problem of negative externalities due to interferences between adjacent frequencies and the resulting need to delimit the rights of operators to transmit signals which are interfering or might interfere as precondition for market transactions resulting in an optimal utilisation of rights see Coase (1959, pp. 25ff.).
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Knieps, G. (2015). Auctions. In: Network Economics. Springer Texts in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-11695-2_5
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