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Auctioning Public Assets
Inmanycountriesallovertheworld,governmentsareprivatisingfirms
thatwerepreviouslyunderpubliccontrol.Thisishappening,forexam-
ple,inpublicutilitysectorssuchasgas,waterandelectricity,intransport
sectorssuchasrailandmetroandinradioandtelephony.Thisbookpro-
videsanoverviewoftheeconomicissuesthatareinvolvedinthistransfer
ofownershipofpublicassets.Combiningatheoreticalframeworkwith
asetofcasestudiesofrecentsalesofstate-ownedassetsfromEurope
andtheUSA,itaskswhichsortofallocationmechanismcanagovern-
mentadopt?Whichismostsuitedtoaparticularsale?Andhowwillthe
choice of allocation mechanism affect future market outcomes? With
contributionsfrominternationalexperts,thisbookoffersanaccessible
introductiontoauctiontheoryandaninvaluable,non-technicalanalysis
ofexistingknowledge.Itwillbeofinteresttostudents,non-specialists
andpolicy-makersalike.
maarten janssen isaprofessorofmicroeconomicsatErasmusUni-
versityRotterdam.Hismainresearchinterestsareingametheoryand
theeconomicsofinformation.Hisresearchhasfocusedonco-ordination
games, consumer search and adverse selection. He has been advising
firmsandgovernmentbodiesonissuesrelatedtomarketstructure.
Auctioning Public Assets
Analysis and Alternatives
Editedby
Maarten Janssen
cambridge university press
Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo
Cambridge University Press
The Edinburgh Building, Cambridge cb2 2ru, UK
Published in the United States of America by Cambridge University Press, New York
www.cambridge.org
Information on this title: www.cambridge.org/9780521830591
© Cambridge University Press 2004
This publication is in copyright. Subject to statutory exception and to the provision of
relevant collective licensing agreements, no reproduction of any part may take place
without the written permission of Cambridge University Press.
First published in print format 2004
isbn-13 978-0-511-16518-4 eBook (EBL)
isbn-10 0-511-16518-8
eBook (EBL)
isbn-13 978-0-521-83059-1 hardback
isbn-10 0-521-83059-1 hardback
isbn-13 978-0-521-53757-5 paperback
isbn-10 0-521-53757-6 paperback
Cambridge University Press has no responsibility for the persistence or accuracy of urls
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Contents
Listoffigures pagevii
Listoftables viii
Listofcontributors ix
Preface xiii
Introduction 1
maarten janssen
PartI Theory
1 Auctiontheoryforauctiondesign 19
tilman börgers and eric van damme
2 BeautyContestdesign 64
maurice dykstra and nico van der windt
3 Preventingcollusionamongfirmsinauctions 80
timothy c. salmon
4 Levellingtheplayingfieldinauctionsandthe
prohibitionofstateaid 108
emiel maasland, yves montangie and
roger van den bergh
5 Allocationmechanismsandpost-allocationinteraction 130
maarten janssen and benny moldovanu
PartII Casestudies
6 SpectrumauctionsbytheUnitedStatesFederal
CommunicationsCommission 147
timothy c. salmon
v
vi Contents
7 AnanalysisoftheEuropean3Glicensingprocess 177
emiel maasland and benny moldovanu
8 Auctionsofgastransmissionaccess:the
Britishexperience 197
tanga morae mcdaniel and karsten neuhoff
9 ThedesignofTreasurybondauctions:some
casestudies 230
joseph swierzbinski and tilman börgers
10 Matchingmarkets 257
benny moldovanu
11 Competitiveprocurementofreintegrationservices
intheNetherlands 273
maurice dykstra and jaap de koning
12 Theprovisionofrailservices 296
luisa affuso and david newbery
Index 310
Figures
2.1 Differentprocedurescanleadtodifferentoutcomes page73
6.1 Mobiletelephoneoperatorcoveragebycounty 170
8.1 Competitioninthegassupplysector,UK 201
8.2 Gasconsumption,UK 203
8.3 SharesofUKgasproduction 203
8.4 GaspipelinesintheUKandtheNorthSea 205
8.5 StFergusandBactonconstraintcosts 208
8.6 ElfExploration’sexcessnominations 209
8.7 Priceinsecondarycapacityauction 210
8.8 NTSchargesandfloorprices 212
8.9 Energyavailabilityandsales 213
8.10 Percentagebywhichauctionpriceexceedsreserveprice:
averageoverfourrounds 220
8.11 Monthlyaveragedpricedifferencebetweenday-aheadspot
marketsforgasatStFergusandNationalBalancingPoint
andweightedaveragepricespaidinauctionformonthly
entryrights 221
8.12 Availableentrycapacityinmonthlyauctionsfor
StFergus 222
8.13 MonthlyaveragesofspotpricesattheNationalBalancing
PointandStFergus 223
vii
Tables
1.1 Anexampletoillustratethemulti-unitVickrey
auction page30
1.2 Descriptionofthestateofasimultaneous
ascendingauction 32
1.3 Player’sbiddingrightsinroundtinasimultaneous
ascendingauction 33
1.4 Increasingmarginalvalues(forplayer1) 47
1.5 Theexposureproblem 49
1.6 Thefree-riderproblem 50
2.1 Biddingrules 74
2.2 Evaluationofbiddingrules 76
3.1 Biddervalues 84
4.1 BandwidthinMHzforeachlicence 123
5.1 Biddervaluations 139
6.1 Biddervalues 148
7.1 Classificationoflicensingmethods 178
8.1 Capacitybuy-backs,April2000–February2001 224
9.1 Summaryofcasestudies 254
10.1 Reserveprices 268
10.2 Possiblematching 268
11.1 Organisationsinvolvedinsocialsecurityandactivelabour
marketpolicyintheNetherlands 276
12.1 Thebid-scoringsysteminArgentina 305
viii
