Does the choice of auction format affect prices in spectrum auctions?

Auctions are now the standard approach for allocating spectrum licences for mobile use worldwide. The types of auction format used to award spectrum vary widely, including both sealed bids and open formats, such as the Simultaneous Multiple Round Auction (SMRA), clock auction (clock) and combinatorial clock auction (CCA). To a significant extent, spectrum awards have become a laboratory for testing new auction designs for simultaneous award of related products, with academic analysis of these formats lagging practice. Recent research into these formats has highlighted differences in the incentives they create for bidding behaviour by participants which may in turn lead to different pricing outcomes. This paper investigates whether there is empirical evidence to support theoretical arguments that the choice of auction format affects price outcomes. The scope for such analysis has historically been constrained by the limited number of observations, with outcomes of individual spectrum auctions being highly sensitive to local factors. However, with the growth in the number of countries using auctions to allocate spectrum (often repeatedly and using different formats), it is now possible to identify reasonably robust sample sizes. We find statistical evidence that open formats produce higher revenues than sealed bid formats. This is consistent with the theory that, in common-value settings, open formats allow for price discovery, which in turn encourages bidders to be confident in their willingness to express their valuations through bids, leading to more efficient (and higher-priced) auction outcomes. It is widely recognised that bidders for mobile spectrum typically have a high degree of common value in their valuations, given that they are typically competitors with closely related business cases. We also find evidence that the CCA produces higher prices than other open formats. Interestingly, this effect is much more pronounced for low-band (sub-1 GHz) spectrum, which is scarcer than other types of mobile spectrum, and where the stakes for mobile operators are highest. This result is consistent with recent research which suggests that prices in CCAs may be distorted upwards by incentives for bidders to bid strategically to drive up rivals' prices.