publication . Preprint . Article . 2000

Contestable Licensing

Zvika Neeman; Gerhard Oskar Orosel;
Open Access
  • Published: 01 Jul 2000
We analyze a model of (repeated) franchise bidding for natural monopoly that relies on contestable licensing -- the right to operate the franchise belongs to the party who owns the appropriate license as long as the license is not successfully contested through a process of competitive bidding -- and demonstrate the usefulness of contestable licensing in inducing high quality performance from incumbent franchisees. In a world where quality is observable but not verifiable, the simple regulatory scheme we describe combines market-like incentives with regulatory oversight to generate efficient outcomes. Our analysis builds on the "Chicago approach" to regulating a...
free text keywords: jel:D42, jel:D45, jel:L51, Economics and Econometrics, Economics, Econometrics and Finance (miscellaneous)

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