A Model of Radio Replacement for Spectrum Policy

Abstract

In spectrum policy, reallocation decisions are based on assessments of interference and economic feasibility between incumbents and new entrants. In many cases, new entrants claim that coexistence is possible with cooperation by incumbents through device modification or radio replacement. However, incumbents can respond with claims of emissions or economic interference from equipment constraints. In this article, I model an incumbent’s set of responses to a new entrant based on radio replacement scenarios. Coasean bargains between incumbents and new entrants should be possible to compensate for equipment modifications. Yet since reallocation decisions are based on public information, rather than private information, incentives for strategic holdout increase, perpetuating deadweight losses in under-utilized radio spectrum.

Keywords: spectrum policy, spectrum reallocation, holdout problem

JEL Classification: K23, L43, L69