Gaming in Combinatorial Clock Auctions

Abstract

Combinatorial Clock Auctions (CCAs) have recently been used around the world to allocate spectrum for mobile telecom licenses. CCAs are claimed to significantly reduce the scope for gaming or strategic bidding. This paper shows, however, that CCAs facilitate strategic bidding. Real bidders in telecom markets are not only interested in the spectrum they win themselves and the price they pay for that, but also in raising rivals’ cost. CCAs provide bidders with excellent opportunities to do so. High auction prices in recent auctions in the Netherlands and Austria are probably to a large extent due to the CCA format. Bidding under a budget constraint is also a highly complicated gaming exercise in a CCA.

Keywords: combinatorial auctions, telecom markets, raising rivals' cost

JEL Classification: D440, L960