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Collusive Bidding: Lessons from the FCC Spectrum Auctions

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Author Info
Peter Cramton () (Economics Department, University of Maryland)
Jesse Schwartz () (Economics Department, Vanderbilt University)

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Abstract

The Federal Communications Commission (FCC) spectrum auctions use a simultaneous ascending auction design. Bidders bid on numerous communication licenses simultaneously, with bidding remaining open on all licenses until no bidder is willing to bid higher on any license. With full revelation of bidding information, simultaneous open bidding allows bidders to send messages to their rivals, telling them on which licenses to bid and which to avoid. These strategies can help bidders coordinate a division of the licenses, and enforce the proposed division by directed punishments. We examine solutions to mitigate collusive bidding in the spectrum auctions, and then apply these ideas to the design of daily electricity auctions.

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File URL: http://www.cramton.umd.edu/papers2000-2004/00jre-collusive-bidding-lessons.pdf
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Publisher Info
Paper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 00jre.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 31 pages
Date of creation: May 2000
Date of revision: 09 Mar 1999
Publication status: Published in Journal of Regulatory Economics, 17:1, 229-252, May 2000.
Handle: RePEc:pcc:pccumd:00jre

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Postal: Economics Department, University of Maryland, College Park, MD 20742-7211
Phone: (202) 318-0520
Fax: (202) 318-0520
Web page: http://www.cramton.umd.edu

For technical questions regarding this item, or to correct its listing, contact: (Peter Cramton).

Related research
Keywords: Auctions; Collusion; Multiple Object Auctions; Spectrum Auctions;

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Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Peter Cramton, 1997. "The FCC Spectrum Auctions: An Early Assessment," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 6(3), pages 431-495, 09. [Downloadable!] (restricted)
    Other versions:
  2. Lawrence M. Ausubel & Peter Cramton & R. Preston McAfee & John McMillan, 1997. "Synergies in Wireless Telephony: Evidence from the Broadband PCS Auctions," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 6(3), pages 497-527, 09. [Downloadable!] (restricted)
    Other versions:
  3. Graham, Daniel A & Marshall, Robert C, 1987. "Collusive Bidder Behavior at Single-Object Second-Price and English Auctions," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1217-39, December. [Downloadable!] (restricted)
  4. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 4(2), pages 267-343, Summer.
    Other versions:
  5. Robert J. Weber, 1997. "Making More from Less: Strategic Demand Reduction in the FCC Spectrum Auctions," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 6(3), pages 529-548, 09. [Downloadable!] (restricted)
  6. Lawrence M. Ausubel & Peter Cramton, 1998. "The Optimality of Being Efficient," Papers of Peter Cramton 98wpoe, University of Maryland, Department of Economics - Peter Cramton, revised 18 Jun 1999. [Downloadable!]
  7. Bykowsky, Mark M & Cull, Robert J & Ledyard, John O, 2000. "Mutually Destructive Bidding: The FCC Auction Design Problem," Journal of Regulatory Economics, Springer, vol. 17(3), pages 205-28, May. [Downloadable!] (restricted)
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  8. Paul Milgrom, 2000. "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 245-272, April. [Downloadable!] (restricted)
    Other versions:
  9. McMillan, John, 1994. "Selling Spectrum Rights," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 145-62, Summer. [Downloadable!] (restricted)
  10. Peter Cramton & John McMillan & Paul Milgrom & Bradley Miller & Bridger Mitchell & Daniel Vincent & Robert Wilson, 1998. "Simultaneous Ascending Auctions with Package Bidding," Papers of Peter Cramton 98cra2, University of Maryland, Department of Economics - Peter Cramton. [Downloadable!]
  11. Mailath, George J. & Zemsky, Peter, 1991. "Collusion in second price auctions with heterogeneous bidders," Games and Economic Behavior, Elsevier, vol. 3(4), pages 467-486, November. [Downloadable!] (restricted)
  12. 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. [Downloadable!]
  13. McAfee, R Preston & McMillan, John, 1996. "Analyzing the Airwaves Auction," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 159-75, Winter. [Downloadable!] (restricted)
  14. Baldwin, Laura H & Marshall, Robert C & Richard, Jean-Francois, 1997. "Bidder Collusion at Forest Service Timber Sales," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 657-99, August.
  15. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September. [Downloadable!] (restricted)
    Other versions:
  16. Peter Cramton & Jesse Schwartz, 2000. "Collusive Bidding in the FCC Spectrum Auctions," Econometric Society World Congress 2000 Contributed Papers 1210, Econometric Society. [Downloadable!]
    Other versions:
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