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Mutually Destructive Bidding: The FCC Auction Design Problem

Bykowsky, Mark. M and Cull, Robert J. and Ledyard, John O. (1998) Mutually Destructive Bidding: The FCC Auction Design Problem. Social Science Working Paper, 916. California Institute of Technology , Pasadena, CA. (Unpublished)

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Dissatisfaction with previous assignment mechanisms and the desire to raise revenue induced Congress to grant the FCC authority to auction radio licenses. The debate over an appropriate auction design was wide ranging with many imaginative proposals. Many of the arguments and their scientific support are unfortunately not publicly available. Here, we present our side of this debate for the record. Synergies across license valuations complicate the auction design process. Theory suggests that a “simple” (i.e., non-combinatorial) auction will have difficulty in assigning licenses efficiently in such an environment. This difficulty increases with increases in “fitting complexity.” In some environments, bidding may become “mutually destructive.” Experiments indicate that a combinatorial auction is superior to a simple auction in terms of economic efficiency and revenue generation in bidding environments with a low amount of fitting complexity. Concerns that a combinatorial auction will cause a “threshold” problem are not borne out when bidders for small packages can communicate.

Item Type:Report or Paper (Working Paper)
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Additional Information:Revised version. Original dated to January 1995. Published as Bykowsky, Mark M., Robert J. Cull, and John O. Ledyard. "Mutually destructive bidding: The FCC auction design problem." Journal of Regulatory Economics 17, no. 3 (2000): 205-228.
Group:Social Science Working Papers
Series Name:Social Science Working Paper
Issue or Number:916
Record Number:CaltechAUTHORS:20170818-151840242
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:80631
Deposited By: Jacquelyn Bussone
Deposited On:21 Aug 2017 16:43
Last Modified:03 Oct 2019 18:33

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