A global analysis of third generation mobile telecommunications market entry

National regulatory authorities (NRAs) attempt to encourage participation in spectrum assignments by enhancing entrants' likelihood of success. The question this study addresses is: Can NRA policy tools really affect the probability an entrant wins a 3G spectrum licence? In particular, the econometric analysis allows consideration of whether licence concession or mode of assignment encourages entry. The study finds that auction assignment processes only slightly increase the probability of entry, whilst price and quantity concessions have no impact. --Market entry,global mobile telephone markets,3G spectrum assignment

The Role of Auction Design in Awarding Spectrum

Auctions play an important role in economics. In their most basic form, they are one of the ways in which various commodities, financial assets and concession rights are allocated to individuals and firms, particularly in a market-oriented setting. An auction is a market institution with an explicit set of rules determining resource allocation and prices on the basis of bids from the market participants. Since some products such as spectrum concessions have no standard value, auctions provide one way approaching the question of price formation of these products.This paper explores the details of Turkish GSM 1800 MHz auction held in April, 2000 within auction theory and competition policies framework. According to the findings of this study, since the auction design inappropriately dealt with market conditions, Is-Tim, winning bidders of one of two spectrums on offer, was able to make a high bid by deriving the price of first license, the reserve price of second one, up to excessive level, so other bidders were not able to afford to bid over this price at second round. First finding of this study is that Is-Tim is either predatory pricer or winner s curse both of which undermines general economic efficiency. As a result by not selling second license, Turkish GSM market has been unnecessarily concentrated; Turkish Treasury has obtained less revenue than it would; and the liability of TT owner of third license at the extremely high winning price of the first license, has soared more than what it otherwise would be by possibly undermining the market value of TT.Auction, Competition Policies, Concession, Spectrum Rights, Turkey

An Econometric Analysis of 3G Auction Spectrum Valuations

Scarce radio spectrum is assigned to mobile network operators (MNOs) by national regulatory authorities (NRAs). Spectrum is usually assigned by beauty contest or an auction. The process requires that winners make a payment to the government. MNOs seek scarce spectrum to enable the provision of wireless services for profit. While MNOs are imperfectly aware of their costs, NRAs rely solely on MNOs for this information. As such, NRAs set spectrum assignment conditions (including minimum bid price) largely ignorant of MNO operating conditions. This study examines the performance of 3G auction outcomes in terms of the prices paid by winners via an econometric analysis of a unique sample of national 3G spectrum auctions. These winning bids depend on national and mobile market conditions, spectrum package attributes, license process, and post-award operator requirements. Finally, model estimation accounts for the censored nature of these data.Mobile telephone markets, spectrum allocation, spectrum bid price

Self-tuning experience weighted attraction learning in games

Self-tuning experience weighted attraction (EWA) is a one-parameter theory of learning in games. It addresses a criticism that an earlier model (EWA) has too many parameters, by fixing some parameters at plausible values and replacing others with functions of experience so that they no longer need to be estimated. Consequently, it is econometrically simpler than the popular weighted fictitious play and reinforcement learning models. The functions of experience which replace free parameters “self-tune” over time, adjusting in a way that selects a sensible learning rule to capture subjects’ choice dynamics. For instance, the self-tuning EWA model can turn from a weighted fictitious play into an averaging reinforcement learning as subjects equilibrate and learn to ignore inferior foregone payoffs. The theory was tested on seven different games, and compared to the earlier parametric EWA model and a one-parameter stochastic equilibrium theory (QRE). Self-tuning EWA does as well as EWA in predicting behavior in new games, even though it has fewer parameters, and fits reliably better than the QRE equilibrium benchmark

Auction Design and the Success of National 3G Spectrum Auctions

This study empirically examines a sample of national wireless spectrum assignments for the period 2000-2007 to identify the sources of revenue variations. An econometric model that recognises the censored nature of the sample relates per capita winning bid (per Mhz) values to auction design variables (license award process), national and mobile market conditions, spectrum package attributes and post-award obligations identified from national regulatory authority tender documents. The analysis reveals that most auction design variables independently impact on realized 3G spectrum auction revenue in a manner consistent with auction theory.Wireless telephone markets, 3G spectrum auctions, spectrum bid price

Can Groups Solve the Problem of Overbidding in Contests?

This paper reports an experiment that examines whether groups can make better decisions than individuals in contests. Our experiment replicates previous findings that individual players significantly overbid relative to theoretical predictions, incurring substantial losses. There is high variance in individual bids and strong heterogeneity across individual players. The new findings of our experiment are that groups make bids that are 25% lower, bids have less variance, and there is less heterogeneity across groups than across individuals. Therefore, groups receive significantly higher and more homogeneous payoffs than individuals. We elicit individual and group preferences towards risk using simple lotteries. The results indicate that groups make less risky decisions, which is a possible explanation for lower bids in contests. Most importantly, we find that groups learn to make lower bids from communication and negotiation between group members.Rent-seeking; Contest; Experiments; Risk; Over-dissipation; Group Decision-making

Inclusive Cognitive Hierarchy

Cognitive hierarchy theory, a collection of structural models of non-equilibrium thinking, in which players' best responses rely on heterogeneous beliefs on others' strategies including naive behavior, proved powerful in explaining observations from a wide range of games. We introduce an inclusive cognitive hierarchy model, in which players do not rule out the possibility of facing opponents at their own thinking level. Our theoretical results show that inclusiveness is crucial for asymptotic properties of deviations from equilibrium behavior in expansive games. We show that the limiting behaviors are categorized in three distinct types: naive, Savage rational with inconsistent beliefs, and sophisticated. We test the model in a laboratory experiment of collective decision-making. The data suggests that inclusiveness is indispensable with regard to explanatory power of the models of hierarchical thinking.Series: Department of Strategy and Innovation Working Paper Serie

One, two, (three), infinity: Newspaper and lab beauty-contest experiments

"Beauty-contest" is a game in which participants have to choose, typically, a number in [0,100], the winner being the person whose number is closest to a proportion of the average of all chosen numbers. We describe and analyze Beauty-contest experiments run in newspapers in UK, Spain, and Germany and find stable patterns of behavior across them, despite the uncontrollability of these experiments. These results are then compared with lab experiments involving undergraduates and game theorists as subjects, in what must be one of the largest empirical corroborations of interactive behavior ever tried. We claim that all observed behavior, across a wide variety of treatments and subject pools, can be interpreted as iterative reasoning. Level-1 reasoning, Level-2 reasoning and Level-3 reasoning are commonly observed in all the samples, while the equilibrium choice (Level-Maximum reasoning) is only prominently chosen by newspaper readers and theorists. The results show the empirical power of experiments run with large subject-pools, and open the door for more experimental work performed on the rich platform offered by newspapers and magazines.Experiments, bounded rationality, Beauty-contest, parallelism, Leex

Chess players' performance beyond 64 squares: A case study on the limitations of cognitive abilities transfer

In a beauty contest experiment with over 6,000 chess players, ranked from amateur to world class, we found that Grandmasters act very similar to other humans. This even holds true when they play exclusively against players of approximately their own strength. In line with psychological research on chess players' thinking, we argue that they are not more rational in a game theoretic sense per se. Their skills are rather specific for their game.chess, beauty contest, cognitive transfer