Spectrum Auctions: How They Should and How They Should Not Be Shaped

Abstract

Spectrum auctions are multiple-unit auctions where the objects auctioned are not necessarily identical. It is shown that the requirement of independent bids in such auction can prevent the existence of pure strategy equilibria (which implies inefficiency). Thus, we suggest that spectrum auctions should allow combinatorial bids. Additionally, all the auctions mentioned were multiple-round auctions - those are shown to offer an invitation to collude. A Folk Theorem as in repeated games can be proven. Preferable to a multiple-rounds scheme is a Vickrey auction, or, at least, the multiple-rounds scheme should (with a certain probability) be supplemented with a publicly announced last round. The paper is also (briefly) concerned with some other problems as a simultaneous vs. sequential procedure, the Winners' Curse, entry into the auctions, and the consideration of consumers' interests in the resulting (e.g. mobile phone) market.