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Spectrum license auctions with exit (and call) options: Alternative remedies for the exposure problem

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  • Hu, Luke
  • Wolfstetter, Elmar G.

Abstract

Inspired by some spectrum auctions we consider a stylized license auction with incumbents and a potential entrant. Whereas the entrant values only the bundle of several spectrum blocks (synergy), incumbents’ marginal valuations are non-increasing. The seller proactively encourages entry and subjects incumbents to a spectrum cap. In this framework, a simultaneous multi-round auction (SMRA) gives rise to an exposure problem that distorts efficiency and yields low revenue. We consider three remedies and rank their performance: a combinatorial Vickrey auction, a SMRA with exit option that allows the entrant to annul his bid, and a SMRA with call option that lifts the spectrum cap if entry failed to occur and then allows the successful incumbent to acquire stranded spectrum at a fixed price.

Suggested Citation

  • Hu, Luke & Wolfstetter, Elmar G., 2014. "Spectrum license auctions with exit (and call) options: Alternative remedies for the exposure problem," Information Economics and Policy, Elsevier, vol. 27(C), pages 13-23.
    • Handle: RePEc:eee:iepoli:v:27:y:2014:i:c:p:13-23
    DOI: 10.1016/j.infoecopol.2014.04.002
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    References listed on IDEAS

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    Cited by:

    1. Wolfstetter, Elmar G., 2022. "Universal high-speed broadband provision: A simple auction approach," Information Economics and Policy, Elsevier, vol. 60(C).

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