Package Bidding for Spectrum Licenses

The FCC was an innovator in adopting the rules of the simultaneous ascending-price auction for its sales of spectrum licenses. While these rules have performed well in the auctions conducted so far (and would perform even better with the design improvements suggested in our first report), there are two inherent limitations in any design that seeks to assign and price the licenses individually. First, such designs create strategic incentives for bidders interested in multiple licenses that are substitutes to reduce their demands for some of the licenses in order to reduce the final prices of the others; this is the demand reduction problem. Second, even if bidders behave non-strategically, there is a fundamental problem with the basic concept of individual-license pricing when licenses are complementary. In simultaneous ascending-price auctions, from a bidder's perspective this is the exposure problem. A bidder who is unsuccessful in bidding for a large package of licenses may be left with a partial package whose total price cannot be justified in the absence of those complementary licenses it failed to win. This problem is present in any auction mechanism that sells licenses individually, with no opportunity to bid on packages. In this report our task is confined to analyses of the merits of package bidding and the practical problems of implementation. In our next report, we will outline proposals for the details of the procedural rules and other aspects of implementing a practical design, as well as the software development that would be necessary.Auctions; Spectrum Auctions; Multiple-Round Auctions; Efficiency

Complementarities and Collusion in an FCC Spectrum Auction

We empirically study bidding in the C Block of the US mobile phone spectrum auctions. Spectrum auctions are conducted using a simultaneous ascending auction design that allows bidders to assemble packages of licenses with geographic complementarities. While this auction design allows the market to find complementarities, the auction might also result in an inefficient equilibrium. In addition, these auctions have equilibria where implicit collusion is sustained through threats of bidding wars. We estimate a structural model in order to test for the presence of complementarities and implicit collusion. The estimation strategy is valid under a wide variety of alternative assumptions about equilibrium in these auctions and is robust to potentially important forms of unobserved heterogeneity. We make suggestions about the design of future spectrum auctions.Technology and Industry

Contractual allocation of decision rights and incentives: The case of automobile distribution

We analyze empirically the allocation of rights and monetary incentives in automobile franchise contracts. These contracts substantially restrict the decision rights of dealers and grant manufacturers extensive contractual completion and enforcement powers, converting the manufacturers, de facto, in a sort of quasi-judiciary instance. Variation in the allocation of decision rights and incentive intensity is explained by the incidence of moral hazard in the relation. In particular, when the cost of dealer moral hazard is higher and the risk of manufacturer opportunism is lower, manufacturers enjoy more discretion in determining the performance required from their dealers and in using mechanisms such as monitoring, termination and monetary incentives to ensure such performance is provided. We also explore the existence of interdependencies between the different elements of the system. and find some complementarities between completion and termination rights, and between monitoring rights and the intensity of incentives.Franchising, contracts, self-enforcement, incentives, complementarities, automobiles

Spectrum Auction Design

Spectrum auctions are used by governments to assign and price licenses for wireless communications. The standard approach is the simultaneous ascending auction, in which many related lots are auctioned simultaneously in a sequence of rounds. I analyze the strengths and weaknesses of the approach with examples from US spectrum auctions. I then present a variation, the package clock auction, adopted by the UK, which addresses many of the problems of the simultaneous ascending auction while building on its strengths. The package clock auction is a simple dynamic auction in which bidders bid on packages of lots. Most importantly, the auction allows alternative technologies that require the spectrum to be organized in different ways to compete in a technology-neutral auction. In addition, the pricing rule and information policy are carefully tailored to mitigate gaming behavior. An activity rule based on revealed preference promotes price discovery throughout the clock stage of the auction. Truthful bidding is encouraged, which simplifies bidding and improves efficiency. Experimental tests and early auctions confirm the advantages of the approach.Auctions, spectrum auctions, market design, package auction, clock auction, combinatorial auction

Reflections on the EU objectives in addressing aggressive tax planning and harmful tax practices Final Report. CEPS Report November 2019

This Report analyses the EU’s instruments to tackle aggressive tax planning and harmful tax practices. Based on desk research, interviews with stakeholders and expert assessments, it considers the coherence, relevance, and added value of the EU’s approach. The instruments under analysis are found to be internally coherent and consistent with other EU policies and with the international tax agenda, in particular with the OECD/G20 BEPS framework. The Report also confirms the continued relevance of most of the original needs and problems addressed by the EU’s initiatives in the field of tax avoidance. There is also EU added value in having common EU instruments in the field to bolster coordination and harmonise the implementation of tax measures. One cross-cutting issue identified is the impact of digitalisation on corporate taxation. Against this background, the Report outlines potential improvements to the EU tax strategy such as: making EU tax systems fit for the digital era; leading the international debate on tax avoidance; enabling capacity building in Member States and developing countries; strengthening tax good governance in third countries; ensuring a consistent approach at home and abroad; achieving a level playing field for all companies; and increasing tax certainty and legal certainty

Simultaneous Ascending Auction

The simultaneous ascending auction has proved to be a successful method of auctioning many related items. Simultaneous sale and ascending bids enable price discovery, which helps bidders build desirable packages of items. Although package bids are not allowed, the auction format does handle mild complementarities well. I examine the auction design and its performance in practice.Auctions, Ascending Auctions, Market Design

Matching with Couples: a Multidisciplinary Survey

This survey deals with two-sided matching markets where one set of agents (workers/residents) has to be matched with another set of agents (firms/hospitals). We first give a short overview of a selection of classical results. Then, we review recent contributions to a complex and representative case of matching with complementarities, namely matching markets with couples. We discuss contributions from computer scientists, economists, and game theorists.matching; couples; stability; computational complexity; incentive compatibility; restricted domains; large markets