Comparing the Ability of Different Auction Mechanisms to Efficiently Designate Spectrum between Licensed and Unlicensed Use

Abstract

This paper employs analytical methods to evaluate the ability of three different auction mechanisms to determine the efficient designation of spectrum between licensed and unlicensed use. The two regimes explored are 'licensed' spectrum, in which a licensee maintains exclusive rights to use the spectrum, subject to a set of service rules, and 'unlicensed' spectrum, in which multiple users are able to share spectrum on an open access basis. For each auction, we examine bidder incentives and provide detailed reports on both auction revenue and bidder surplus in a set of Nash equilibrium outcomes. Theoretical results are consistent with the conclusions of Bykowsky, Olson, Sharkey (2010), that a market can be used to allocate spectrum between licensed and unlicensed use. Results also show that a first-price and Clarke-Groves mechanisms are more likely to lead to the efficient designation of spectrum than a second-price auction.