Spectrum auction design: Simple auctions for complex sales
Jacob Goeree (),
Stefan Mayer and
Telecommunications Policy, 2014, vol. 38, issue 7, 613-622
Following the successful PCS Auction conducted by the US Federal Communications Commission in 1994, auctions have replaced traditional ways of allocating valuable radio spectrum. Spectrum auctions have raised hundreds of billion dollars worldwide and have become a role model for market-based approaches in the public and private sectors. The PCS spectrum was sold via a simultaneous multi-round auction, which forces bidders to compete for licenses individually even though they typically value certain combinations. This exposes bidders to risk when they bid aggressively for a desired combination but end up winning an inferior subset. Foreseeing this possibility, bidders may act cautiously with adverse effects for revenue and efficiency. Combinatorial auctions allow for bids on combinations of licenses and thus hold the promise of improved performance. Recently, a number of countries worldwide have switched to the combinatorial clock auction to sell spectrum. This two-stage auction uses a core-selecting payment rule. The number of possible packages a bidder can submit grows exponentially with the number of licenses, which adds complexity to the auction. For larger auctions with dozens of licenses bidders cannot be expected to reveal all their valuations during such an auction. We analyze the impact of two main design choices on efficiency and revenue: simple “compact” bid languages versus complex “fully expressive” bid languages and simple “pay-as-bid” payment rules versus complex “core-selecting” payment rules. We consider these design choices both for ascending and sealed-bid formats. We find that simplicity of the bid language has a substantial positive impact on the auction׳s efficiency and simplicity of the payment rule has as a substantial positive impact on the auction׳s revenue. The currently popular combinatorial clock auction, which uses a complex bid language and payment rule, achieves the lowest efficiency and revenue among all treatment combinations.
Keywords: Spectrum auctions; Bid languages; Laboratory experiments (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:telpol:v:38:y:2014:i:7:p:613-622
Ordering information: This journal article can be ordered from
http://www.elsevier. ... /30471/bibliographic
Access Statistics for this article
Telecommunications Policy is currently edited by Erik Bohlin
More articles in Telecommunications Policy from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().