Skip to main content Accessibility help

We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.

Close cookie message
×
Hostname: page-component-745bb68f8f-hvd4g Total loading time: 0 Render date: 2025-01-26T03:41:05.477Z Has data issue: false hasContentIssue false

7 - Spectrum Auction Design

from Part II - The Combinatorial Clock Auction Designs

Published online by Cambridge University Press:  26 October 2017

By
Peter Cramton
Edited by
Martin Bichler  and
Jacob K. Goeree
Peter Cramton
Affiliation:
Department of Economics, University of Maryland
Martin Bichler
Affiliation:
Technische Universität München
Jacob K. Goeree
Affiliation:
University of New South Wales, Sydney
Get access

Summary

Introduction

Fred Kahn recognized the important role of market design in improving how markets work. He believed that prices should be set in an open competitive process, rather than administratively. I had the pleasure of working with Fred on a project to evaluate the pricing rule in California's electricity market.We examined whether the electricity market should use uniform pricing or pay-as-bid pricing (Kahn et al. 2001). In this tribute to Fred Kahn, I also focus on auction design, but in the communications industry.

Spectrum auctions have been used by governments to assign and price spectrum for about 20 years. Over those years, the simultaneous ascending auction, first introduced in the US in 1994, has been the predominant method of auctioning spectrum. The auctions have proved far superior to the prior methods of beauty contests and lotteries (Cramton 1997; Milgrom 2004).

Despite the generally positive experience with the simultaneous ascending auction, several design issues have surfaced. Some were addressed with minor rule changes. For example, bidders’ use of trailing digits to signal other bidders and support tacit collusion was eliminated by limiting bids to integer multiples of the minimum increment (Cramton and Schwartz 2002). However, many other design problems remain. In this paper, I identify these problems, and describe a new approach—the combinatorial clock auction—which is based primarily on the clock-proxy auction (Ausubel et al. 2006), which addresses the main limitations of the simultaneous ascending auction.

My focus here is on spectrum auction design, rather than spectrum policy more generally. Certainly, communications regulators face many other critical challenges, such as how best to free up new spectrum for auction (Cramton et al. 1998), or whether an auction is needed at all (FCC 2002). For some allocations, it is better to set aside the spectrum for common property use, as is done with unlicensed spectrum. In particular, for applications that do not create additional scarcity, the commons model is better than the auction model.

Type
Chapter
Information
Handbook of Spectrum Auction Design , pp. 141 - 169
Publisher: Cambridge University Press
Print publication year: 2017

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ausubel, Lawrence M. (2004) “An Efficient Ascending-BidAuction for Multiple Objects,” AmericanEconomic Review, 94:5 1452–1475.Google Scholar
Ausubel, Lawrence M. (2006) “An Efficient Dynamic Auction for Heterogeneous Commodities,” American Economic Review, 96:3 602–629.CrossRefGoogle Scholar
Ausubel, Lawrence M. and Oleg V., Baranov (2010) “Core-Selecting Auctions with Incomplete Information,” Working Paper, University of Maryland.
Ausubel, Lawrence M. and Peter, Cramton (2002) “Demand Reduction and Inefficiency inMulti-Unit Auctions,” University of Maryland Working Paper 9607, revised July 2002.
Ausubel, Lawrence M. and Peter Cramton (2011) “Activity Rules for the Combinatorial Clock Auction,” Working Paper, University of Maryland.
Ausubel, Lawrence M. and Peter, Cramton (2004) “Auctioning Many Divisible Goods,” Journal ofthe European Economic Association, 2, 480–493, April–May.Google Scholar
Ausubel, Lawrence M., Peter Cramton, R. Preston, McAfee, and John, McMillan (1997) “Synergies in Wireless Telephony: Evidence from the Broadband PCS Auctions,” Journal of Economics andManagement Strategy, 6:3 497–527.Google Scholar
Ausubel, Lawrence M., Peter, Cramton, and Paul, Milgrom (2006) “The Clock-Proxy Auction: A Practical Combinatorial Auction Design,” in Peter, Cramton, Yoav, Shoham, and Richard, Steinberg (eds.), Combinatorial Auctions, Chapter 5, 115–138, MIT Press.
Ausubel, Lawrence M. and Paul, Milgrom (2002) “Ascending Auctions with Package Bidding,” Frontiers of Theoretical Economics, 1: 1–45. http://www.bepress.com/bejte/frontiers/vol1/iss1/art1.Google Scholar
Ausubel, Lawrence M. and Paul, Milgrom (2006a) “Ascending Proxy Auctions,” in Peter, Cramton, Yoav, Shoham, and Richard, Steinberg (eds.), Combinatorial Auctions, Chapter 3, 79–98, MIT Press.
Ausubel, Lawrence M. and Paul, Milgrom (2006b) “The Lovely but Lonely Vickrey Auction,” in Peter, Cramton, Yoav, Shoham, and Richard, Steinberg (eds.), Combinatorial Auctions, Chapter 1, 17–40, MIT Press.
Bichler, Martin, Pasha, Shabalin, and Jurgen, Wolf (2011) “Efficiency, Auctioneer Revenue, and Bidding Behavior in the Combinatorial Clock Auction,” Working Paper, TU Munchen.
Brusco, Sandro and Giuseppe, Lopomo (2002) “Collusion via Signalling in Simultaneous Ascending Bid Auctions with Heterogeneous Objects, with and without Complementarities,” Review ofEconomic Studies, 69, 407–436.CrossRefGoogle Scholar
Bulow, Jeremy, Jonathan, Levin, and Paul, Milgrom (2009) “Winning Play in Spectrum Auctions,” Working Paper, Stanford University.
Coase, Ronald H. (1959) “The Federal Communications Commission,” Journal of Law andEconomics, 2, 1–40.CrossRefGoogle Scholar
Cramton, Peter (1995) “MoneyOut of Thin Air: The NationwideNarrowband PCS Auction,” Journalof Economics and Management Strategy, 4, 267–343.CrossRefGoogle Scholar
Cramton, Peter (1997) “The FCC Spectrum Auctions: An Early Assessment,” Journal of Economicsand Management Strategy, 6:3 431–495.Google Scholar
Cramton, Peter (2006) “Simultaneous Ascending Auctions,” in Peter, Cramton, Yoav, Shoham, and Richard, Steinberg (eds.), Combinatorial Auctions, Chapter 4, 99–114, MIT Press.
Cramton, Peter, Evan, Kwerel, Gregory, Rosston, and Andrzej, Skrzypacz (2011) “Using Spectrum Auctions to Enhance Competition inWireless Services,” Journal of Law and Economics, 54, 2011.CrossRefGoogle Scholar
Cramton, Peter, Evan, Kwerel, and John, Williams (1998) “Efficient Relocation of Spectrum Incumbents,” Journal of Law and Economics, 41, 647–675.CrossRefGoogle Scholar
Cramton, Peter and Jesse, Schwartz (2002) “Collusive Bidding in the FCC Spectrum Auctions,” Contributions to Economic Analysis & Policy, 1:1 1–17.CrossRefGoogle Scholar
Cramton, Peter, Yoav, Shoham, and Richard, Steinberg (2006) Combinatorial Auctions, Cambridge, MA: MIT Press.
Cramton, Peter, Andrzej, Skrzypacz and Robert, Wilson (2007) “The 700 MHz Spectrum Auction: An Opportunity to Protect Competition In a Consolidating Industry” submitted to the U.S. Department of Justice, Antitrust Division.
Day, Robert and Peter, Cramton (2012) “The Quadratic Core-Selecting Payment Rule for Combinatorial Auctions,” Operations Research, 60:3 588-603, May–June.Google Scholar
Day, Robert and Paul, Milgrom (2008) “Core-selecting Package Auctions,” International Journal ofGame Theory, 36, 393–407, March.Google Scholar
Day, Robert W. and S., Raghavan (2007) “Fair Payments for Efficient Allocations in Public Sector Combinatorial Auctions,” Management Science, 53, 1389–1406.CrossRefGoogle Scholar
Erdil, Aytek and Paul, Klemperer (2010) “A New Payment Rule for Cole-Selecting Package Auctions,” Journal of the European Economic Association, 8, 537–547.CrossRefGoogle Scholar
7 spectrum auction design 169 Federal Communications Commission (2002) “Spectrum Policy Task Force,” ET Docket No. 02–135.
Harsha, Pavithra, Cynthia, Barnhart,David C., Parkes, and Haoqi, Zhang (2010) “Strong Activity Rules for Iterative Combinatorial Auctions,” Computers & Operations Research, 37:7 1271–1284.CrossRefGoogle Scholar
Kagel, John H. and Dan, Levin (1986) “The Winner's Curse and Public Information in Common Value Auctions,” American Economic Review, 76, 894–920.Google Scholar
Kagel, John H., Dan, Levin, and Jean-Francois, Richard (1996) “Revenue Effects and Information Processing in English Common Value Auctions,” American Economic Review, 86, 442–460.Google Scholar
Kagel, John H., Yuanchuan, Lien, and Paul, Milgrom (2010) “Ascending Prices and Package Bidding: A Theoretical and Experimental Analysis,” American Economic Journal: Microeconomics, 2:3 160–185.CrossRefGoogle Scholar
Kahn, Afred E., Peter, Cramton, Robert H., Porter, and Richard D., Tabors (2001) “Uniform Pricing or Pay-as-Bid Pricing: A Dilemma for California and Beyond,” Electricity Journal, July, 70–79.CrossRefGoogle Scholar
Klemperer, Paul (2004) Auctions: Theory and Practice, Princeton University Press.
McMillan, John (1994) “Selling Spectrum Rights,” Journal of Economic Perspectives, 8, 145–162.CrossRefGoogle Scholar
Milgrom, Paul (2004) Putting Auction Theory to Work, Cambridge: Cambridge University Press.
Milgrom, Paul (2007) “Package Auctions and Exchanges,” Econometrica, 75, 935–966.CrossRefGoogle Scholar
Milgrom, Paul (2010) “Simplified Mechanisms with Applications to Sponsored Search and Package Auctions,” Games and Economic Behavior, 70:1 62–70.CrossRefGoogle Scholar
Pagnozzi, Marco (2010) “Are Speculators Unwelcome in Multi-object Auctions?” AmericanEconomic Journal: Microeconomics, 2:2 97–131.CrossRefGoogle Scholar
Parkes, David C. (2006) “Iterative Combinatorial Auctions,” in Peter, Cramton, Yoav, Shoham, and Richard, Steinberg (eds.), Combinatorial Auctions, Chapter 2, 41–78, MIT Press.
Porter, David, Stephen, Rassenti, Anil, Roopnarine, and Vernon, Smith (2003) “Combinatorial Auction Design,” Preceedings of the National Academy of Sciences, 100, 11153–11157.CrossRefGoogle Scholar

Save book to Kindle

To save this book to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

  • Spectrum Auction Design
  • Edited by Martin Bichler, Technische Universität München, Jacob K. Goeree, University of New South Wales, Sydney
  • Book: Handbook of Spectrum Auction Design
  • Online publication: 26 October 2017
  • Chapter DOI: https://doi.org/10.1017/9781316471609.008
Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

  • Spectrum Auction Design
  • Edited by Martin Bichler, Technische Universität München, Jacob K. Goeree, University of New South Wales, Sydney
  • Book: Handbook of Spectrum Auction Design
  • Online publication: 26 October 2017
  • Chapter DOI: https://doi.org/10.1017/9781316471609.008
Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

  • Spectrum Auction Design
  • Edited by Martin Bichler, Technische Universität München, Jacob K. Goeree, University of New South Wales, Sydney
  • Book: Handbook of Spectrum Auction Design
  • Online publication: 26 October 2017
  • Chapter DOI: https://doi.org/10.1017/9781316471609.008
Available formats
×