Entry Deterrence and Free Riding in License Auctions: Incumbent Heterogeneity and Monotonicity

Abstract We examine free riding for entry deterrence in license auctions with heterogeneous incumbents. establish the monotonicity of randomized preemptive bidding equilibria: an incumbent a higher entry-loss rate has greater free-riding incentive, choosing lower deterring probability. then identify conditions existence series fully or partially participating equilibria such that two more incumbents bounded heterogeneity their rates participate bidding. As application, we simple case bipartite group consisting one “leader” and many “followers”. show policy limiting leader’s participation (set-asides entrants, excessive market shares, etc.) may not increase