Optimal concession of water services under common value
Salanié, François; Bontems, Philippe; Aubert, Cécile (2006), Optimal concession of water services under common value, European Economic Association & Econometric Society, 2006-08, Vienne, Autriche
TypeCommunication / Conférence
Conference titleEuropean Economic Association & Econometric Society
MetadataShow full item record
Abstract (EN)When an incumbent firm is in charge of a distribution network, it accumulates information on the state of the network. This `common value' information creates a winner's curse during auctions for renewing the concession. The municipality contracting out the provision of the service trades off the incumbent's incentives to invest, with lower costs when changing supplier, and must induce effective competition despite the winner's curse. We show that the optimal concession contract can be designed to address this difficulty, with asymmetric auctions in which the incumbent is favored and increasing output schedules. Contrary to standard auctions, the winner's curse can be prevented at no expected cost.
Subjects / KeywordsWater distribution; Common value auction; concession and incentive contract
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Fawzy, Salwa A.; El-adaway, Islam H.; Perreau-Saussine, Louis; Abdel Wahab, Mohamed S.; Hamed, Tarek H. (2018) Article accepté pour publication ou publié