1. Why would we expect that winning firms in Demsetz-type auctions would strategically bid low?

2. How might you determine if intermodal competition is sufficient to discipline the sole provider of rail transportation between a coal mine and its customers?

3. Natural gas pipelines are typically contract carriers. Shippers contract for capacity when it is built and agree to pay the capacity costs associated with their share of the pipeline whether they use it or not. The costs to a shipper to use its capacity are the energy costs associated with powering the compressors. Explain why you would expect to see active secondary markets where shippers trade capacity and why it is efficient to allow such markets.