Recent Auctions Research Articles

The future investment costs of offshore wind: An estimation based on auction results

Offshore wind is one of the renewable energy technologies with the largest potential. However, it still not competitive in costs with other similar technologies, and hence requires public support, which has been mostly done recently through auctions. These auctions have achieved seemingly very large cost reductions in the last years. However, some results may be misleading, because of the large differences between auctions in terms of their design and of the amount of costs explicitly or implicitly assumed by governments. In this paper we estimate the underlying CAPEX behind the most recent auctions’ winning bids for a consistent set of assumptions, but accounting for their different designs. Our results show that the cost reductions achieved are indeed real, and larger than shown before. We obtain costs reductions of 50% between 2020 and 2026, and a rather steep learning curve. This general reduction trend is robust to changes in our assumptions. However, our results also show that CAPEX estimates are very sensitive to WACC rates, capacity factors, or market prices (when auction designs rely on a larger market price exposure). On the other hand, wind farm size and distance to shore show low correlation with CAPEX. Finally, we also show that, if the current trend in cost reduction continues beyond 2026, offshore wind might achieve cost competitiveness by 2030. This in turn may point out to a higher share of offshore wind in future energy scenarios.

Federal Toll Road Concession Program in Brazil: Is It Moving in the Right Direction?

This paper assesses the toll road concession program started by the federal government of Brazil, from its beginning in 1996 until 2012. Brazil has one of the longest road networks, under private concessions, in the entire world. The authors use the case study approach, based on the available information, to analyze the evolution of the program over the course of its history. Specifically, a detailed analysis is conducted from three perspectives: those of the competitiveness of the tender, the impact of toll modifications caused by the rebalancing of the economics of the contract, and the actual evolution of the traffic flows as compared to their estimates, respectively. It is found that the most recent auctions have been very competitive. Moreover, with the original toll roads, bidders relied on early traffic forecasts that turned out to be overly optimistic, and over the years, contract rebalancing has led to large increases in toll rates. Overall, and even though Brazil’s program can be considered successful in many ways, there is still considerable room for improvement.

Divisible Good Auctions with Asymmetric Information: An Experimental Examination

AbstractAn experimental approach is used to compare bidding behavior and auction performance in uniform-price and discriminatory auctions when there is incomplete information concerning the common value of the auctioned good. In a symmetric information environment, the different auction formats provide the same average revenue. However, when information is asymmetric the discriminatory auction results in higher average revenue than the uniform-price auction. The volatility of revenue is higher in the uniform-price auctions in all treatments. The results, therefore, provide support for the use of the discriminatory format. Subject characteristics and measures of experience in recent auctions are found to be useful in explaining bidding behavior.

Mobile broadband expansion calls for more spectrum or more base stations: analysis of the value of spectrum and the role of spectrum aggregation

This paper analyses the marginal value of spectrum which includes engineering and strategic value. The analysis of the engineering value shows that operators that are able to obtain more spectrum than their competitors, and pursue network sharing and spectrum aggregation have a competitive advantage as they have the lowest production cost, highest margin and highest capacity when usage takes off. The analysis of the strategic value shows that the level of offered data rates is pivotal for operators’ marketing of mobile broadband services and that network sharing in combination with spectrum aggregation has a positive impact on the strategic value. Altogether, the willingness to pay for spectrum in recent auctions has been lower than the estimated marginal value in this analysis. However, it is likely to increase when a broad range of smart mobile devices and mobile broadband are ubiquitously used as this will put unprecedented pressure on mobile networks increasing the demand for spectrum.

Calculating the Value of Unencumbered AWS-3 Spectrum

In this Perspective, we estimate the auction revenue potential of the AWS-3 spectrum if licensed without significant regulatory emcumbrances. Using data from two recent spectrum auctions, regression analysis is used to predict auction revenues. We estimate the 25 Mhz block of spectrum would sell for about $2.8 billion.

Paintings and numbers: an econometric investigation of sales rates, prices, and returns in Latin American art auctions

This paper uses a unique data set of Latin American paintings auctioned by Sotheby's between 1995 and 2002 to investigate several puzzles from the recent auctions literature. Our results suggest that: (i) the reputation of an artist and the provenance of the artwork, often omitted variables in previous studies, seem to be more important determinants of the sale price of a painting than more standard factors, such as medium and size, (ii) the opinion of art experts seems to be of limited use in predicting whether or not an artwork sells at auction, (iii) there is little supporting evidence for the widespread notion that the best or more expensive artworks tend to generate above average returns (the masterpiece effect), although (iv) there is strong evidence in our data for the declining price anomaly or afternoon effect (that is, when heterogeneous products sold sequentially follow a decreasing pattern of prices.)

Entry in Liberalized Railway Markets: The German Experience

In Germany, competitive franchising is increasingly being used to procure passenger railway services that were previously provided by a state monopolist. This paper analyzes 77 tenders that differ with respect to network size, service frequency, contract duration and the proximity to other lines that are already run by competitors of DB Regio, a subsidiary of the successor of the former state monopolist. Our analysis shows that competitors are more likely to win small networks and more recent auctions. Other controls such as contract duration and the adjacency to other lines run by entrants are insignificant.

Lessons from the Electricity Auctions in Brazil

The first lesson to emerge from the recent auctions falls within a category that might be described as “higher costs of reforms in developing economies.” These range from bidders’ fears of future government-imposed price caps to technical issues, such as the potential loss of efficiency resulting from bidders’ lack of knowledge about ceiling prices, reference supply, and the demand reduction mechanism.

Low-Revenue Equilibria in Simultaneous Ascending-Bid Auctions

Low-revenue equilibria allow participants in an auction to obtain goods at prices lower than would prevail in a competitive market. These outcomes are generated as perfect equilibria of ascending-bid, multiunit auctions. We show that these equilibria are possible under mild conditions—conditions that are likely to prevail in many situations where auction formats have recently been adopted. We argue that these equilibria could explain the low revenues of some recent auctions, and discuss potential remedies to eliminate low-revenue equilibria.

Public Economic Theory

Understanding the role of the government in the economy is a question of fundamental importance. For decades, modern public economists have been working to provide answers as they relate to how society taxes, spends, distributes, regulates and stabilizes its economic systems. To a great extent, this research has been driven by contemporary policy issues. The resulting stream of practical, real-world research has yielded great dividends both to the polity and the academy. Unfortunately, the very success of applied and especially empirical public economics has tended to push more theoretical work to the periphery of the field. As a consequence, the theoretical and applied agendas in public economics have become increasingly distinct. At the same time, important advances in areas such as evolution, game theory, and experimental economics have been slow to work their way into the mainstream of public economic theory. Thus, we see growing gaps between theoretical public economics both with applied public economics and pure economic theory. The main objective of the Journal of Public Economic Theory is to help bridge these two gaps. Strengthening the connection between public economics and modern theoretical research is probably the easier of the two. To this end, the Journal will actively promote the development and dissemination of new theoretical tools and techniques in the field. We will make every effort to develop a reputation as an outlet for theorists seeking to demonstrate and explore the direct economic applications of their work. We believe it is equally important to demonstrate that theory can make significant contributions to the current policy debate. Consider, for example, the interplay between theoretical and empirical work in the controversies surrounding rational expectations or the impact of game theory on the structuring of the recent spectrum auctions. When theory is cut off from the applied side of a field, it runs the risk of beginning to feed upon itself and of becoming less and less relevant to applied researchers and the outside world. By the same token, when empiricists pay attention only to the data and previous empirical work, they risk missing new JPET 98038

Simultaneous Auctions with Synergies

Motivated by recent auctions of licenses for the radio-frequency spectrum, we consider situations where multiple objects are auctioned simultaneously by means of a second-price, sealed-bid auction. For some buyers, called global bidders, the value of multiple objects exceeds the sum of the objects' values separately. Others, called local bidders, are interested in only one object. In a simple independent private values setting, we characterize an equilibrium that is symmetric among the global bidders and derive some comparative statics results. In particular, the addition of global bidders leads to less aggressive bidding.Journal of Economic LiteratureClassification Number: D44.