Abstract
I study the recent Canadian advanced wireless services (AWS) li- cense auction in which 40 percent megahertz spectrum is set aside for new entrant firms in order to encourage the new entry. I show that spectrum set asides indeed result in inefficient allocation, since a new entrant firm (even though its valuation is lower than incumbents’ will- ingness to pay) will enter the market. Moreover, this inefficient entry further reduces social welfare. But under some circumstance, I prove that a spectrum set aside increases the seller’s revenue and consumer surplus. The simulation also gets the same result.KeywordsMulti-Unit AuctionsSet-AsideSocial WelfareJEL CodesD44D82
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