Using Spectrum Auctions to Enhance Competition in Wireless Services

Cramton, Peter; Kwerel, Evan; Rosston, Gregory L.; Skrzypacz, Andrzej

doi:10.1086/661939

Cited by 56 publications

(27 citation statements)

References 18 publications

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“…'Add to that the demographics, physical geography and political history of the country' (Alden, 2012, p. 1), including 'license terms of use, infrastructure costs, and various other factors' (Bazelon & McHenry, 2012, p. 2), are the variables that affect the dynamics of spectrum valuation. Consequently, a bidder's spectrum license valuation process is not always limited to its rational economic value 'but also the value of keeping the spectrum from a competitor' (Cramton, Kwerel, Rosston, & Skrzypacz, 2011, p. S168), creating a more competitive and sophisticated auction environment (Maasland & Onderstal, 2006).…”

Section: Discussionmentioning

confidence: 99%

Hierarchical modeling and prediction of spectrum auction revenue by a posteriori clusters

Yun

Sarkani

Mazzuchi

2014

International Journal of Management Science and Engineering Man

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The electromagnetic spectrum is a crucial asset for wireless technology innovation and for the industry's economy. We examine spectrum auction-related databases, construct a hierarchical data matrix, and propose an optimal auction revenue model. The model incorporates statistically derived deterministic and stochastic variables to develop a spectrum valuation methodology for its primary market. Our study reveals that the underlying regulations, bidding behavior, and spectrum demands due to wireless technology advancement are effectively elucidated by the selected explanatory variables and are highly correlated with auction revenues. This paper is the first to introduce a hierarchical modeling technique that incorporates a multilevel data matrix culminated from 3995 licenses of 15 Federal Communications Commission spectrum auctions to enable economic valuation for future spectrum auctions. Furthermore, the results of this study can be applied to evaluate the significance of sunk costs, winner's curses, and associated cost synergies, which are economic implications of spectrum auctions. Our research contributions are twofold. First, the hierarchical auction model can maximize spectrum valuation methodologies, thereby assisting spectrum regulators and the wireless industry. Second, we compare the reproducibility of hierarchical and ordinary least squares modeling techniques to support adequate validation and their extensive utilization in academic disciplines.

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Section: Discussionmentioning

confidence: 99%

Hierarchical modeling and prediction of spectrum auction revenue by a posteriori clusters

Yun

Sarkani

Mazzuchi

2014

International Journal of Management Science and Engineering Man

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“…3 However, to assure entry, bidding credits must raise entrants' willingness to pay above an incumbents preemptive willingness to pay (Hoppe et al, 2006;Gruber, 2007;Azacis and Burguet, 2008;Ansari and Munir, 2008). Recently, Cramton et al (2011) theoretically demonstrated that the impact of bidding credits on enhancing competition is ambiguous. 4 Beauty contests require that MNOs submit plans or bids including spectrum-use plans.…”

Section: Introductionmentioning

confidence: 99%

Spectrum Licensing, Policy Instruments and Market Entry

et al. 2013

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractCompetition policy attempts to address the potential for market failure by encouraging competition in service markets. Often, in wireless communication service markets, national regulatory authorities seek to encourage entry via the spectrum assignment process. Instruments used include the assignment mode (auction or beauty contest), setting aside licenses and providing bidding (price and quantity) credits for potential entrants, and making more licenses (spectrum blocks) available than incumbent firms (excess licenses). The empirical analysis assesses the effectiveness of these policy instruments on encouraging entry. The econometric results show that the probability of entry is enhanced by using auction assignments and excess licenses. Furthermore, quantity, but not price, concessions encourage entry.JEL Classification: D82, L51, L96

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“…See McAfee and McMillan (), Kwerel and Rosston (), Hazlett and Munoz (), and Cramton et al. (), for example. Timber harvesting and oil drilling rights also are typically allocated to suppliers of wood and oil products via auction.…”

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confidence: 99%

“…Cramton et al. () note that auctions may fail to promote economic efficiency because “an incumbent will include in its private value not only its use value of the [scarce input] but also the value of keeping [it] from a competitor.” Our terminology parallels that of the US Department of Justice () which, in the context of spectrum auctions, observes, “the private value [of spectrum] for incumbents ... includes not only the revenue from use of the spectrum but also any benefits gained by preventing rivals from improving their services and thereby eroding the incumbents’ existing businesses. The latter might be called ‘foreclosure value’ as distinct from ‘use value.…”

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confidence: 99%

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When do auctions ensure the welfare‐maximizing allocation of scarce inputs?

Mayo

Sappington

2016

The RAND J of Economics

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We determine when an unfettered auction will ensure the welfare-maximizing allocation of a scarce input that enhances product quality and may reduce production costs. A supplier values the input for this "use value" and for its "foreclosure value," because once the input is acquired, it is unavailable to rivals. An unfettered auction often ensures the welfare-maximizing allocation of an input increment. However, it can fail to do so when the input would increase relatively rapidly the competitive position of a rival with a moderate competitive disadvantage. Bidder handicapping that ensures auctions generate welfare-maximizing input allocations differ from standard handicapping policies.

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Using Spectrum Auctions to Enhance Competition in Wireless Services

Cited by 56 publications

References 18 publications

Hierarchical modeling and prediction of spectrum auction revenue by a posteriori clusters

Hierarchical modeling and prediction of spectrum auction revenue by a posteriori clusters

Spectrum Licensing, Policy Instruments and Market Entry

When do auctions ensure the welfare‐maximizing allocation of scarce inputs?

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