Working Paper: NBER ID: w14765
Authors: Jeremy Bulow; Jonathan Levin; Paul Milgrom
Abstract: We describe factors that make bidding in large spectrum auctions complex -- including exposure and budget problems, the role of timing within an ascending auction, and the possibilities for price forecasting -- and how economic and game-theoretic analysis can assist bidders in overcoming these problems. We illustrate with the case of the FCC's Advanced Wireless Service auction, in which a new entrant, SpectrumCo, faced all these problems yet managed to purchase nationwide coverage at a discount of roughly a third relative to the prices paid by its incumbent competitors in the same auction, saving more than a billion dollars.
Keywords: spectrum auctions; bidding strategies; exposure problems; budget constraints; game theory
JEL Codes: C72; D44; L21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| exposure problems (C21) | strategic complexities (D74) |
| budget constraints (H60) | strategic complexities (D74) |
| strategic complexities (D74) | unexpected outcomes (D80) |
| bidding strategies (D44) | auction outcomes (D44) |
| accurate forecasting of final prices (G17) | bidders' decisions (D44) |
| jump bidding strategy (D44) | lower costs for spectrumCo (L96) |
| exposure risks (J28) | variation in auction prices (D44) |