Spectrum License Auctions with Exit (and Call) Options: Alternative Remedies for the Exposure Problem

14 Pages Posted: 10 Nov 2017

See all articles by Luke Hu

Luke Hu

Humboldt University of Berlin - Institute of Economic Theory

Elmar Wolfstetter

Humboldt University of Berlin - Faculty of Economics; Korea University - College of Economics and Commerce; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: March 14 1, 2013

Abstract

Inspired by some spectrum auctions, we consider a stylized license auction with incumbents and one entrant. Whereas the entrant values only the bundle of several units (synergy), incumbents are subject to non-increasing demand. The seller proactively encourages entry and restricts incumbent bidders. In this framework, an English clock auction gives rise to an exposure problem that distorts efficiency and impairs revenue. We consider three remedies: a (constrained) Vickrey package auction, an English clock auction with exit option that allows the entrant to annul his bid, and an English clock auction with exit and entry option that lifts the bidding restriction if entry failed.

Suggested Citation

Hu, Luke and Wolfstetter, Elmar G., Spectrum License Auctions with Exit (and Call) Options: Alternative Remedies for the Exposure Problem (March 14 1, 2013). Information Economics and Policy, Vol. 27, 2014, Available at SSRN: https://ssrn.com/abstract=3067159

Luke Hu

Humboldt University of Berlin - Institute of Economic Theory ( email )

Spandauer str. 1
Berlin, 10099
Germany

Elmar G. Wolfstetter (Contact Author)

Humboldt University of Berlin - Faculty of Economics ( email )

Institut für Wirtschaftstheorie I
Spandauer Strasse 1
Berlin
Germany
+49 30 2093 5652/3 (Phone)
+49 30 2093 5619 (Fax)

HOME PAGE: http://www2.hu-berlin.de/wt1wo/staff/wolfstetter/index.html

Korea University - College of Economics and Commerce ( email )

Anam-dong, Sungbuk-Ku
Seoul, 136-701
Korea

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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