License Complementarity and Package Bidding: The U.S. Spectrum Auctions

Mo Xiao and Zhe Yuan ()
Additional contact information
Zhe Yuan: Alibaba Group

No 18-06, Working Papers from NET Institute

Abstract: The U.S. spectrum licenses cover geographically distinct areas and are often complementary to each other. A bidder seeking to acquire multiple licenses is then exposed to risks of winning only isolated patches. To allocate licenses more efficiently, the Federal Communications Commission allowed bidders to bid for (predefined) packages of licenses in Auction 73. We estimate the magnitude of license complementarity by modeling the bidding process as an entry game with interdependent markets and evolving bidder belief. Bidders' decisions on bidding (and not bidding) provide bounds on licenses' stand-alone values and complementarity between licenses. We estimate the total complementarity to be around two thirds of the total bidding ($19 billion) in Auction 73. Complementarity in a 1 MHz nationwide license is worth $918 million to an average large bidder but only $120 million to an average small bidder. Our counterfactual analysis shows that the effects of package bidding on bidders' exposure risks depend on package format and package size. More importantly, mixed package bidding increases FCC revenue substantially at the cost of reducing bidder surplus and increasing license allocation concentration.

Keywords: Spectrum Auctions; Complementarity; Package Bidding; Moment Inequalities (search for similar items in EconPapers)
JEL-codes: L5 L8 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2018-09
New Economics Papers: this item is included in nep-des, nep-exp, nep-gth and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: License Complementarity and Package Bidding: US Spectrum Auctions (2022)
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