The Franchise Bidding Solution

Description

Franchise bidding has been proposed as a tool to avoid regulation failures in natural monopoly sitations. The main idea is to replace competition in the market with competition for the market. However, this solution is not so simple to apply in practice and plagued by its own failures. Join Stephane Saussier for an introduction to franchise bidding and its limits, based on the work of Demsetz, Williamson and other prominent economists.

References

Chong, E., Saussier, S., & Silverman, B. S. (2012). Water under the Bridge: City Size, Bargaining Power, Prices and Franchise Renewals in the Provision of Water (EPPP Discussion Paper No.2012-05).

Demsetz, H. (1968). Why Regulate Utilities? The Journal of Law & Economics, 11(1), 55–65.

Engel, E. M. R. A., Fischer, R. D., & Galetovic, A. (2001). Least Present Value of Revenue Auctions and Highway Franchising. Journal of Political Economy, 109(5), 993–1020.

Goldberg, V. P. (1976). Regulation and Administered Contracts. The Bell Journal of Economics, 7(2), 426–448.

Vassallo, J. M. (2006). Traffic Risk Mitigation in Highway Concession Projects: The Experience of Chile. Journal of Transport Economics and Policy, 40(3), 359–381.

Williamson, O. E. (1976). Franchise Bidding for Natural Monopolies-in General and with Respect to CATV. The Bell Journal of Economics, 7(1), 73–104.

Zupan, M. A. (1989). Cable Franchise Renewals: Do Incumbent Firms Behave Opportunistically? The RAND Journal of Economics, 20(4), 473–482.