Peter Cramton

Spectrum auctions are used by governments to assign and price licenses for wireless communication. 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 package clock auction, adopted by the UK, which addresses many of the problems of the simultaneous ascending auction while building on its strengths. The package clock auction is a simple dynamic auction in which bidders bid on packages of lots. Most importantly, the pricing rule and information policy are carefully tailored to mitigate gaming behavior. An activity rule based on revealed preference promotes price discovery throughout the clock stage of the auction. Truthful bidding is encouraged, which simplifies bidding and improves efficiency. Experimental tests confirm the advantages of the approach.
(JEL D44, C78, L96. Keywords: auctions, spectrum auctions, market design, package auction, clock auction, combinatorial auction.)

I thank my collaborators, Larry Ausubel and Paul Milgrom for helpful discussions, as well as Robert Day, Evan Kwerel, Thayer Morrill, Nate Higgins, and Andrew Stocking, and the staff at Ofcom and DotEcon. I am grateful to the National Science Foundation and the Rockefeller Foundation for funding.

Monday, March 3, 2008 3:00 PM 315 Upson Hall NOTE TIME AND LOCATION CHANGE		Theory Seminar Spring 2008 CS 789
	Peter Cramton University of Maryland
	Spectrum Auction Design
	Spectrum auctions are used by governments to assign and price licenses for wireless communication. 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 package clock auction, adopted by the UK, which addresses many of the problems of the simultaneous ascending auction while building on its strengths. The package clock auction is a simple dynamic auction in which bidders bid on packages of lots. Most importantly, the pricing rule and information policy are carefully tailored to mitigate gaming behavior. An activity rule based on revealed preference promotes price discovery throughout the clock stage of the auction. Truthful bidding is encouraged, which simplifies bidding and improves efficiency. Experimental tests confirm the advantages of the approach. (JEL D44, C78, L96. Keywords: auctions, spectrum auctions, market design, package auction, clock auction, combinatorial auction.) I thank my collaborators, Larry Ausubel and Paul Milgrom for helpful discussions, as well as Robert Day, Evan Kwerel, Thayer Morrill, Nate Higgins, and Andrew Stocking, and the staff at Ofcom and DotEcon. I am grateful to the National Science Foundation and the Rockefeller Foundation for funding.