Games and Economic Behavior · 2027 · Marin Coerts、Florian Heine、Frank J. van Ommeren、Arjen C. van Witteloostuijn
Abstract
Auctioning access rights to private providers through competitive tendering has become a central instrument for governments to regulate markets and public services. While efficient in allocating licenses, such auctions may generate monopolistic market structures with adverse effects on consumer welfare. We experimentally evaluate two policy interventions to mitigate these outcomes: introducing post-tender competition and imposing minimum production obligations on winning firms. Our results show that performance obligations substantially improve welfare by raising output and consumer surplus, albeit at the cost of reduced auction revenue. Extending the design with additional treatments, we demonstrate that genuine competition yields even stronger welfare gains. These findings highlight a trade-off between government revenue and consumer welfare in auction design. We conclude that while obligations are an effective tool to counter monopoly distortions, sustaining competition remains essential to maximise total surplus at the market level.