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Spectrum Auction Design

  • Peter Cramton

    ()

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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File URL: http://hdl.handle.net/10.1007/s11151-013-9376-x
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Article provided by Springer & The Industrial Organization Society 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
DOI: 10.1007/s11151-013-9376-x
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  1. John McMillan, 1994. "Selling Spectrum Rights," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 145-162, Summer.
  2. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 267-343, Summer.
  3. Paul Klemperer, 2004. "Introduction to Auctions: Theory and Practice," Introductory Chapters, in: Auctions: Theory and Practice Princeton University Press.
  4. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521551847, October.
  5. 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.
  6. Sandro Brusco & Giuseppe Lopomo, 2002. "Collusion via Signalling in Simultaneous Ascending Bid Auctions with Heterogeneous Objects, with and without Complementarities," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 407-436.
  7. 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.
  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. Lawrence M. Ausubel, 2006. "An Efficient Dynamic Auction for Heterogeneous Commodities," American Economic Review, American Economic Association, vol. 96(3), pages 602-629, June.
  10. Peter Cramton, 1997. "The FCC Spectrum Auctions: An Early Assessment," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 431-495, 09.
  11. 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 160-185, August.
  12. Peter Cramton & Evan Kwerel & Gregory Rosston & Andrzej Skrzypacz, 2011. "Using Spectrum Auctions to Enhance Competition in Wireless Services," Discussion Papers 10-015, Stanford Institute for Economic Policy Research.
  13. Robert Day & Paul Milgrom, 2008. "Core-selecting package auctions," International Journal of Game Theory, Springer;Game Theory Society, vol. 36(3), pages 393-407, March.
  14. repec:oxf:wpaper:2004-w09 is not listed on IDEAS
  15. Paul Milgrom, 2007. "Package Auctions and Exchanges," Econometrica, Econometric Society, vol. 75(4), pages 935-965, 07.
  16. 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.
  17. Lawrence M. Ausubel & Peter Cramton & Marek Pycia & Marzena Rostek & Marek Weretka, 2014. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Review of Economic Studies, Oxford University Press, vol. 81(4), pages 1366-1400.
  18. 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, Wiley Blackwell, vol. 6(3), pages 497-527, 09.
  19. 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.
  20. 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.
  21. 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.
  22. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford.
  23. repec:oxf:wpaper:2009-w11 is not listed on IDEAS
  24. 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.
  25. 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.
  26. Marco Pagnozzi, 2010. "Are Speculators Unwelcome in Multi-object Auctions?," American Economic Journal: Microeconomics, American Economic Association, vol. 2(2), pages 97-131, May.
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