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Spectrum Auction Design

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Abstract

Spectrum auctions are used by governments to assign and price licenses for wireless communications. The standard approach is the simultaneous ascending auction, in which many related lots are auctioned simultaneously in a sequence of rounds. I analyze the strengths and weaknesses of the approach with examples from US spectrum auctions. I then present a variation-the combinatorial clock auction-which has been adopted by the UK and many other countries, which addresses many of the problems of the simultaneous ascending auction while building on its strengths. The combinatorial clock auction is a simple dynamic auction in which bidders bid on packages of lots. Most importantly, the auction allows alternative technologies that require the spectrum to be organized in different ways to compete in a technology-neutral auction. In addition, the pricing rule and information policy are carefully tailored to mitigate gaming behavior. An activity rule based on revealed preference promotes price and assignment discovery throughout the clock stage of the auction. Truthful bidding is encouraged, which simplifies bidding and improves efficiency. Experimental tests and early auctions confirm the advantages of the approach.

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Acknowledgments

I thank my collaborators, Larry Ausubel, Robert Day, and Paul Milgrom for helpful discussions, as well as Nathaniel Higgins, Evan Kwerel, Thayer Morrill, Peter Pitsch, and Andrew Stocking. I thank the staff at Ofcom, especially Graham Louth, Director of Spectrum Markets, whose leadership and intellectual contribution were essential to the successful implementation of the combinatorial clock auction. I am grateful to the National Science Foundation and the Rockefeller Foundation for funding.

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  1. Department of Economics, University of Maryland, College Park, MD, USA

    Peter Cramton

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  1. Peter Cramton
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Correspondence to Peter Cramton.

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Cramton, P. Spectrum Auction Design. Rev Ind Organ 42, 161–190 (2013). https://doi.org/10.1007/s11151-013-9376-x

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