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The effects of spectrum allocation mechanisms on market outcomes: Auctions vs beauty contests

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  • Kuroda, Toshifumi
  • Baquero Forero, Maria del Pilar

Abstract

This paper compares the evolution of seven key market outcomes in 47 countries after the allocation of mobile phone spectrum by auctions and beauty contests held from 2000 to 2008. Traditional auction theory predicts the merits of auction versus “beauty contests”. However, recent theoretical research shows that auctions impose selection and debt effects on the after-market competition that could harm consumers. We employ two semi-parametric estimators to determine the treatment effects and find that 3G mobile phone penetration rates among auctioning countries are 1.04–8.95% lower. Findings suggest that auctions, when used to raise public revenues, not only transfer profits to government but also sacrifice consumer surplus.

Suggested Citation

  • Kuroda, Toshifumi & Baquero Forero, Maria del Pilar, 2017. "The effects of spectrum allocation mechanisms on market outcomes: Auctions vs beauty contests," Telecommunications Policy, Elsevier, vol. 41(5), pages 341-354.
    • Handle: RePEc:eee:telpol:v:41:y:2017:i:5:p:341-354
    DOI: 10.1016/j.telpol.2017.01.006
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    Cited by:

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    2. Bahia, Kalvin & Castells, Pau, 2022. "The impact of spectrum assignment policies on consumer welfare," Telecommunications Policy, Elsevier, vol. 46(1).
    3. Matinmikko-Blue, Marja & Yrjölä, Seppo & Ahokangas, Petri & Seppänen, Veikko & Hämmäinen, Heikki & Jurva, Risto, 2019. "Value of the spectrum for local mobile communication networks: Insights into awarding and pricing the 5G spectrum bands," 30th European Regional ITS Conference, Helsinki 2019 205199, International Telecommunications Society (ITS).
    4. Thornton Matheson & Patrick Petit, 2021. "Taxing telecommunications in developing countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(1), pages 248-280, February.
    5. Jung, Juan & Katz, Raúl, 2022. "Spectrum flexibility and mobile telecommunications development," Utilities Policy, Elsevier, vol. 75(C).
    6. Sridhar, V. & Prasad, Rohit, 2021. "Analysis of spectrum pricing for commercial mobile services: A cross country study," Telecommunications Policy, Elsevier, vol. 45(9).
    7. Matinmikko-Blue, Marja & Yrjölä, Seppo & Ahokangas, Petri & Hämmäinen, Heikki, 2021. "Analysis of 5G spectrum awarding decisions: How do different countries consider emerging local 5G networks?," 23rd ITS Biennial Conference, Online Conference / Gothenburg 2021. Digital societies and industrial transformations: Policies, markets, and technologies in a post-Covid world 238039, International Telecommunications Society (ITS).

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    More about this item

    Keywords

    3G mobile diffusion; Beauty contests; Spectrum auctions; Treatment effects;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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