Strategic Bidding in a Combinatorial Clock Auction: The 700 Mhz Canadian Auction

Abstract

Using data provided by Industry Canada this paper seeks to understand what strategic bidding is in the 2014 700-MHz Canadian auction. The auction format is known as Combinatorial Clock. Its design seeks to induce truthful bidding, that is, a bidder is expected to bid in a way that at each round of the Clock Rounds stage her utility is maximised, and expected to reveal her true valuation for each bundle that make up her final bid in the Combinatorial stage.The Combinatorial Clock auction is an innovative auction design which aims to overcome some of the problems evidenced in the application of the Simultaneous Ascending auction, a format that has been widely popular for assigning radio spectrum to commercial providers of mobile communications services over the last 20 years.The paper uses publicly available data from the auction by Industry Canada. By focusing on the longest of the three auction stages, the Clock Rounds, it examines the evolution of several auction indexes as a means to devise an approach to understand bidders’ strategic behaviour. It also uses a Revealed Preference theory framework to test whether bidders bidding was consistent with utility maximisation. When it is not, the paper analyses evidence to support claims of strategic behaviour.