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

Luke Hu and Elmar Wolfstetter

Information Economics and Policy, 2014, vol. 27, issue C, 13-23

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.

Keywords: Auctions; Combinatorial auctions; Spectrum auction; Bundling; Synergies (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:iepoli:v:27:y:2014:i:c:p:13-23

DOI: 10.1016/j.infoecopol.2014.04.002

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