Tuesday, October 28, 2008

Auction Design and Tacit Collusion in FCC Spectrum Auctions

Posted by D. Daniel Sokol

Patrick Bajari (University of Minnesota - Department of Economics) and Jungwon Yeo (University of Minnesota - Department of Economics graduate student) have written on Auction Design and Tacit Collusion in FCC Spectrum Auctions.

ABSTRACT: The Federal Communications Commission (FCC) has used auctions to award spectrum since 1994. During this time period, the FCC has experimented with a variety of auctions rules including click box bidding and anonymous bidding. These rule changes make the actions of bidders less visible during the auction and also limit the set of bids which can be submitted by a bidder during a particular round. Economic theory suggests that tacit collusion may be more difficult as a result. We examine this proposition using data from 4 auctions: the PCS C Block, Auction 35, the Advanced Wireless Service auction and the 700 Mhz auction. We examine the frequency of jump bids, retaliatory bids and straightforward bids across these auctions. While this simple descriptive exercise has a number of limitations, the data suggests that these rule changes did limit firms' ability to tacitly collude.


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