Description:
An abundant literature on the functioning of auctions and on the advantages and drawbacks of different auction design elements already exists. However, their comparative effects on market concentration have not been explored, despite the increasing concern of governments about this issue. This article covers this gap in the literature. It follows an exploratory approach to provide a better understanding of the relationship between design elements and market concentration. It develops an analytical framework to assess the effects of auction and auction design elements on two aspects of market concentration (number and diversity of firms), infers some research proposals and illustrates this framework with a case study of wind power in Spain. Based on data collected via an expert elicitation survey to key actors, a Multi-criteria Analysis (TOPSIS) was carried out. It is proposed that, compared to administratively-set remuneration, auctions increase market concentration and that some design elements are likely to influence the number and diversity of firms, including the existence of a schedule, the remuneration type and stringent prequalification requirements. However, auctions and their design elements would contribute far less to an increase in market concentration than other policy and socioeconomic context factors. Therefore, if the aim is to increase the number and diversity of firms in the sector, policy makers should prioritize improving these context conditions by, e.g., setting long-term targets and implementing stable regulations. The research proposals put forward in this paper using an inductive approach should be investigated in the future with more advanced quantitative methods