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Raising rivals’ cost in multi-unit auctions

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  • Janssen, Maarten
  • Karamychev, Vladimir

Abstract

The objective many telecom regulators want to achieve when they decide to auction spectrum is that acquiring firms pay a market price (based on the opportunity cost principle). The simultaneous ascending auction may fail in this respect, as it provides bidders with an opportunity to engage in strategic demand reduction. This paper asks whether the combinatorial clock auction (CCA) fares better in this respect. We show that the answer to this question depends on the objectives bidders have. If bidders have only the slightest preference to raise rivals’ cost, they will use the opportunities the CCA provides them to engage in strategic demand expansion. This is even the case when the clock phase ends with excess demand.

Suggested Citation

  • Janssen, Maarten & Karamychev, Vladimir, 2017. "Raising rivals’ cost in multi-unit auctions," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 473-490.
    • Handle: RePEc:eee:indorg:v:50:y:2017:i:c:p:473-490
    DOI: 10.1016/j.ijindorg.2016.04.011
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    References listed on IDEAS

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    More about this item

    Keywords

    Combinatorial auctions; Telecom markets; Spiteful biding; Raising rivals’ costs;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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