Exposure problem in spectrum auctions

Abstract

This thesis studies how different auction formats and mechanisms affect the outcomes of auctions when there are complementarities between the auctioned spectrum licenses. Radio spectrum rights are held and controlled by National Regulatory Authorities (NRAs). Since the first Simultaneous Multi-Round Auctions (SMRAs) conducted in the USA by the Federal Communications Commission (FCC) in 1994 auctions have been a favoured spectrum allocation method across the world. If there are complementarities between spectrum rights in different regions or radio spectrum bands the bidder can have exposure problems. Bidders have exposure problem if they need to obtain multiple items in a single auction or in multiple different auctions and there is a chance that they only end up with a subset of the desired item set. In worst cases bidders with exposure problem in an auction can refrain from submitting higher bids or they can withdraw from the auction altogether. The early spectrum auctions were not well suited for auctions where the auctioned items had complementarities, which was one of the reasons Combinatorial Clock Auctions (CCAs) were theorized in 2006. In the latest 5G spectrum auctions other newer clock-based auctions such Combinatorial Multi-Round Auctions (CMRAs) and Enhanced Simultaneous Multi-Round Auctions (ESMRA), which rules have been crafted to be suitable for auctioning items that have complementarities, have been used. At the same time Simple Clock Auctions (SCAs) have increased in popularity, which operate mostly as CCAs but do not include supplementary bidding rounds. Main ways for eliminating exposure problems are through allowing package bidding or relaxing bid withdrawal rules. In this thesis five different auction formats’ suitability is analysed in cases where there are complementarities between radio spectrum licenses, and how NRAs can affect the outcomes of spectrum auctions, when there are complementarities between the auctioned spectrum licenses.