Measuring the Efficiency of an FCC Spectrum Auction

Abstract

FCC spectrum auctions sell licenses to provide mobile phone service in designated geographic territories. We propose a method to structurally estimate the deterministic component of bidder valuations and apply it to the 1995–1996 C-block auction. We base our estimation of bidder values on a pairwise stability condition, which implies that two bidders cannot exchange licenses in a way that increases total surplus. Pairwise stability holds in many theoretical models of simultaneous ascending auctions, including some models of intimidatory collusion and demand reduction. Pairwise stability is also approximately satisfied in data that we examine from economic experiments. The lack of post-auction resale also suggests pairwise stability. Using our estimates of deterministic valuations, we measure the allocative efficiency of the C-block outcome.