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

When Should Sellers Use Auctions?

A bidding process can be organized so that offers are submitted simultaneously or sequentially. In the latter case, potential buyers can condition their behavior on previous entrants' decisions. The relative performance of these mechanisms is investigated when entry is costly and selective, meaning that potential buyers with higher values are more likely to participate. A simple sequential mechanism can give both buyers and sellers significantly higher payoffs than the commonly used simultaneous bid auction. The findings are illustrated with parameters estimated from simultaneous entry USFS timber auctions where our estimates predict that the sequential mechanism would increase revenue and efficiency.

Increasing Competition and the Winner's Curse: Evidence from Procurement

We assess empirically the effects of the winner's curse which, in common-value auctions, counsels more conservative bidding as the number of competitors increases. First, we construct an econometric model of an auction in which bidders' preferences have both common- and private-value components, and propose a new monotone quantile approach which facilitates estimation of this model. Second, we estimate the model using bids from procurement auctions held by the State of New Jersey. For a large subset of these auctions, we find that median procurement costs rise as competition intensifies. In this setting, then, asymmetric information overturns the common economic wisdom that more competition is always desirable

Playing at Serial Acquisitions

Behavioral biases can result in suboptimal acquisition decisions-with the potential for errors exacerbated in consolidating industries, where consolidators design serial acquisition strategies and fight escalating takeover battles for platform companies that may determine their future competitive position. To guide objective managerial judgment, and to rationally anticipate the irrational behavior of rival bidders or financial markets, this article proposes a modified option-game toolkit for serial acquisition strategy. It brings together insights from both strategy and finance, which quantify acquisition strategies, thus allowing executives to make rational intuitive decisions under uncertainty

Cooperation and Competition when Bidding for Complex Projects: Centralized and Decentralized Perspectives

To successfully complete a complex project, be it a construction of an airport or of a backbone IT system, agents (companies or individuals) must form a team having required competences and resources. A team can be formed either by the project issuer based on individual agents' offers (centralized formation); or by the agents themselves (decentralized formation) bidding for a project as a consortium---in that case many feasible teams compete for the contract. We investigate rational strategies of the agents (what salary should they ask? with whom should they team up?). We propose concepts to characterize the stability of the winning teams and study their computational complexity

Deficit Reduction Through Diversity: How Affirmative Action at the FCC Increased Auction Competition

In recent auctions for paging licenses, the Federal Communications Commission has granted businesses owned by minorities and women substantial bidding credits. In this article, Professors Ayres and Cramton analyze a particular auction and argue that the affirmative action bidding preferences, by increasing competition among auction participants, increased the government's revenue by $45 million. Subsidizing the participation of new bidders can induce established bidders to bid more aggressively. The authors conclude that this revenue- enhancing effect does not provide a sufficient constitutional justification for affirmative action-but when such justification is independently present, affirmative actions can cost the government much less than is currently thought.Auctions; Affirmative Action

A Computational and Experimental Examination of the FCC Incentive Auction

In 2016, the Federal Communications Commission debuted a new auction mechanism, the Incentive Auction, with the intention of obtaining high frequency television broadcasting spectrum, repurposing it for cellular use, and reselling these licenses at profitable prices. In designing this process, the traditional mechanism used for spectrum auctions, the Simulta- neous Multiple Round Auction (SMR), was modified in order to speed the process. This new mechanism, the Incentive Forward Auction (IFA), intended to reduce the number of rounds per auction by lumping similar spectrum licenses together. However, the IFA discourages straightforward bidding strategies and can result in bidders committing more in costs than their established budgets will allow. These mechanisms are compared using two methods: a simulated environment using automated bidding strategies, and a lab environment using human subjects. In simulations, it was found that the IFA was successful in reducing the number of rounds per auction compared with the SMR. However, both simulation and experimental results found that using the IFA resulted in consistent losses to auction efficiency and revenue