License prices for financially constrained firms

Abstract

It 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.

LICENSE AUCTIONS WHEN WINNING BIDS ARE FINANCED THROUGH DEBT*

“…In Janssen and Karamychev [2007], the auction selects the least risk-averse bidder, which affects prices on the aftermarket. In Burguet and McAfee [2009] firms are financially constrained. A higher bid in the auction then implies less funds for production in the aftermarket.…”

Information Alliances in Contests with Budget Limits

“…Note that in this framework an alliance is not a vehicle to add or compound the e¤orts of several players to a group's mega-e¤ort that may then beat the rivals or rival groups. 12 Further, while the formation of an alliance may generate an additional surplus to its members, or may generate a cost, the formation distribution on [0; b]. 12 We also disregard a possible wasteful con ‡ict about the distribution of the prize among alliance members here.…”

“…12 Further, while the formation of an alliance may generate an additional surplus to its members, or may generate a cost, the formation distribution on [0; b]. 12 We also disregard a possible wasteful con ‡ict about the distribution of the prize among alliance members here. As has been highlighted by Esteban and Sákovics (2003) and Gar…nkel (2004), the possibility of wasteful internal …ghts about the distribution of a prize inside the alliance can be a major drawback to the formation of alliances.…”

Budget-constrained sequential auctions with incomplete information

“…Note that once good 1 is sold, the income of the winner of good 1 is reduced by the price of good 1. Bidder i's equilibrium bid 7 for good 2 is the minimum of i's valuation for good 2 and i's depleted income. The price of either good can be at most 60 since 60 is the income of one of the bidders.…”