Wireless communications rely on access to radio spectrum. With a continuing proliferation of wireless applications and services, the spectrum resource becomes scarce. The measurement studies of spectrum usage, however, reveal that spectrum is being used sporadically in many geographical areas and times. In an attempt to promote efficiency of spectrum usage, the Federal Communications Commission has supported the use of market mechanism to allocate and assign radio spectrum. We focus on the secondary use of spectrum defined as a temporary access of existing licensed spectrum by a user who does not own a spectrum license. The secondary use of spectrum raises numerous technical, institutional, economic, and strategic issues that merit investigation. Central to the issues are the effects of transaction costs associated with the use of market mechanism and the uncertainties due to potential interference.The research objective is to identify the pre-conditions as to when and why the secondary use would emerge and in what form. We use transaction cost economics as the theoretical framework in this study. We propose a novel use of agent-based computational economics to model the development of the secondary use of spectrum. The agent-based model allows an integration of economic and technical considerations to the study of pre-conditions to the secondary use concept. The agent-based approach aims to observe the aggregate outcomes as a result of interactions among agents and understand the process that leads to the secondary use, which can then be used to create policy instruments in order to obtain the favorable outcomes of the spectrum management
