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Spectrum Auction Design

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  • Peter Cramton

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Abstract

Spectrum auctions are used by governments to assign and price licenses for wireless communications. The standard approach is the simultaneous ascending auction, in which many related lots are auctioned simultaneously in a sequence of rounds. I analyze the strengths and weaknesses of the approach with examples from US spectrum auctions. I then present a variation-the combinatorial clock auction-which has been adopted by the UK and many other countries, which addresses many of the problems of the simultaneous ascending auction while building on its strengths. The combinatorial clock auction is a simple dynamic auction in which bidders bid on packages of lots. Most importantly, the auction allows alternative technologies that require the spectrum to be organized in different ways to compete in a technology-neutral auction. In addition, the pricing rule and information policy are carefully tailored to mitigate gaming behavior. An activity rule based on revealed preference promotes price and assignment discovery throughout the clock stage of the auction. Truthful bidding is encouraged, which simplifies bidding and improves efficiency. Experimental tests and early auctions confirm the advantages of the approach. Copyright Springer Science+Business Media New York 2013

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Bibliographic Info

Article provided by Springer in its journal Review of Industrial Organization.

Volume (Year): 42 (2013)
Issue (Month): 2 (March)
Pages: 161-190

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Handle: RePEc:kap:revind:v:42:y:2013:i:2:p:161-190

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Web page: http://www.springerlink.com/link.asp?id=100336

Related research

Keywords: Auctions; Spectrum auctions; Market design; Package auction; Clock auction; Combinatorial auction; D44; C78; L96;

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  1. Marco Pagnozzi, 2010. "Are Speculators Unwelcome in Multi-object Auctions?," American Economic Journal: Microeconomics, American Economic Association, vol. 2(2), pages 97-131, May.
  2. Peter Cramton & Evan Kwerel & Gregory Rosston & Andrzej Skrzypacz, 2012. "Using Spectrum Auctions to Enhance Competition in Wireless Services," Papers of Peter Cramton 11ckrs, University of Maryland, Department of Economics - Peter Cramton, revised 2012.
  3. Robert Day & Paul Milgrom, 2008. "Core-selecting package auctions," International Journal of Game Theory, Springer, vol. 36(3), pages 393-407, March.
  4. Lawrence M. Ausubel & Peter Cramton, 2004. "Auctioning Many Divisible Goods," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 480-493, 04/05.
  5. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Series Working Papers 2004-W09, University of Oxford, Department of Economics.
  6. Sandro Brusco & Giuseppe Lopomo, 2004. "Collusion via Signalling in Simultaneous Ascending Bid Auctions with Heterogeneous Objects, with and without Complementarities," Levine's Bibliography 122247000000000385, UCLA Department of Economics.
  7. Ausubel Lawrence M & Milgrom Paul R, 2002. "Ascending Auctions with Package Bidding," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 1(1), pages 1-44, August.
  8. Levin, Dan & Kagel, John H & Richard, Jean-Francois, 1996. "Revenue Effects and Information Processing in English Common Value Auctions," American Economic Review, American Economic Association, vol. 86(3), pages 442-60, June.
  9. Robert W. Day & S. Raghavan, 2007. "Fair Payments for Efficient Allocations in Public Sector Combinatorial Auctions," Management Science, INFORMS, vol. 53(9), pages 1389-1406, September.
  10. John McMillan, 1994. "Selling Spectrum Rights," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 145-162, Summer.
  11. Lawrence M. Ausubel, 2004. "An Efficient Ascending-Bid Auction for Multiple Objects," American Economic Review, American Economic Association, vol. 94(5), pages 1452-1475, December.
  12. Peter Cramton, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Papers of Peter Cramton 95jems, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
  13. Peter Cramton & Andrzej Skrzypacz & Robert Wilson, 2007. "The 700 MHz Spectrum Auction: An Opportunity to Protect Competition In a Consolidating Industry," Papers of Peter Cramton 07c700mhz, University of Maryland, Department of Economics - Peter Cramton, revised 2007.
  14. Peter Cramton & Evan Kwerel & John Williams, 1998. "Efficient Relocation of Spectrum Incumbents," Papers of Peter Cramton 98jleer, University of Maryland, Department of Economics - Peter Cramton, revised 12 Jul 1998.
  15. Lawrence M. Ausubel & Peter Cramton, 1995. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Papers of Peter Cramton 98wpdr, University of Maryland, Department of Economics - Peter Cramton, revised 22 Jul 2002.
  16. Alfred E. Kahn & Peter Cramton & Robert H. Porter & Richard D. Tabors, 2001. "Uniform Pricing or Pay-as-Bid Pricing: A Dilemma for California and Beyond," Papers of Peter Cramton 01ej, University of Maryland, Department of Economics - Peter Cramton, revised 27 Jan 2001.
  17. Paul Milgrom, 2007. "Package Auctions and Exchanges," Econometrica, Econometric Society, vol. 75(4), pages 935-965, 07.
  18. Lawrence M. Ausubel, 2006. "An Efficient Dynamic Auction for Heterogeneous Commodities," American Economic Review, American Economic Association, vol. 96(3), pages 602-629, June.
  19. Peter Cramton, 1997. "The FCC Spectrum Auctions: An Early Assessment," Papers of Peter Cramton 97jemsfcc, University of Maryland, Department of Economics - Peter Cramton, revised 12 Jul 1998.
  20. Paul Klemperer, 2004. "Introduction to Auctions: Theory and Practice
    [Auctions: Theory and Practice]
    ," Introductory Chapters, Princeton University Press.
  21. John H. Kagel & Yuanchuan Lien & Paul Milgrom, 2010. "Ascending Prices and Package Bidding: A Theoretical and Experimental Analysis," American Economic Journal: Microeconomics, American Economic Association, vol. 2(3), pages 160-85, August.
  22. Lawrence M. Ausubel & Peter Cramton & R. Preston McAfee & John McMillan, 1998. "Synergies in Wireless Telephony: Evidence from the Broadband PCS Auctions," Papers of Peter Cramton 97jems, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
  23. Robert Day & Peter Cramton, 2008. "Quadratic Core-Selecting Payment Rules for Combinatorial Auctions," Papers of Peter Cramton 08qcspr, University of Maryland, Department of Economics - Peter Cramton, revised 2012.
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Citations

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Cited by:
  1. Aytek Erdil & Paul Klemperer, 2009. "A New Payment Rule for Core-Selecting Package Auctions," Economics Papers 2009-W11, Economics Group, Nuffield College, University of Oxford.
  2. Harbord, David & Pagnozzi, Marco, 2014. "Britain's electricity capacity auctions: lessons from Colombia and New England," MPRA Paper 56224, University Library of Munich, Germany.
  3. Todd R. Kaplan & Shmuel Zamir, 2014. "Advances in Auctions," Discussion Papers 1405, Exeter University, Department of Economics.
  4. Ingo Vogelsang, 2013. "The Endgame of Telecommunications Policy? A Survey," Review of Economics, Lucius & Lucius, vol. 64(3), pages 193-269.
  5. Sano, Ryuji, 2013. "Vickrey-reserve auctions and an equilibrium equivalence," Mathematical Social Sciences, Elsevier, vol. 65(2), pages 112-117.
  6. Sano, Ryuji, 2012. "Non-bidding equilibrium in an ascending core-selecting auction," Games and Economic Behavior, Elsevier, vol. 74(2), pages 637-650.

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