Allocation decisions in network industries

In this paper, I want to propagate a new analytical tool: The usage of Menu Auctions for modelling complicated auctions, negotiations, rent seeking, etc. is advocated, because, contrary to “normal” auctions and bargaining models, an arbitrary number of additional aspects can be taken into account. After concentrating on “Truthful Equilibria” [Bernheim, B.D., Whinston, M.D., 1986. Menu auctions, resource allocation, and economic influence, Quarterly Journal of Economics, 1-31.] a certain broad class of Menu Auctions show unique and efficient allocations. Under an additional concavity condition even the equilibrium bids are unique. Two examples are discussed: the privatisation of a state-owned industry and the buying of wholesale electricity (concluding contracts with a number of producers) by a utility. These examples also serve to trace the sources of “non-concavities” which can prevent the uniqueness of bids and can provide the auctioneer with incentives to exclude bidders from the competition.