Working Paper: NBER ID: w11671
Authors: Patrick Bajari; Jeremy T. Fox
Abstract: FCC spectrum auctions sell licenses to provide mobile phone service in designated geographic territories. We propose a method to structurally estimate the deterministic component of bidder valuations and apply it to the 1995-1996 C-block auction. We base our estimation of bidder values on a pairwise stability condition, which implies that two bidders cannot exchange licenses in a way that increases total surplus. Pairwise stability holds in many theoretical models of simultaneous ascending auctions, including some models of intimidatory collusion and demand reduction. Pairwise stability is also approximately satisfied in data that we examine from economic experiments. The lack of post-auction resale also suggests pairwise stability. Using our estimates of deterministic valuations, we measure the allocative efficiency of the C-block outcome.
Keywords: FCC spectrum auctions; bidder valuations; allocative efficiency; pairwise stability; collusion
JEL Codes: L00; L51; C1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| pairwise stability (C62) | structural model (E10) |
| pairwise stability (C62) | true valuations of bidders (D44) |
| auction design (D44) | efficiency of the license allocation (D45) |
| bidders value complementarities (D44) | observed allocation is not efficient (D61) |
| awarding each license to distinct bidders (D44) | allocative efficiency (D61) |
| observed packages of licenses too small (D45) | efficient allocation (D61) |
| government's motivation for maximizing efficiency (H11) | revenue maximization motives (L21) |