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Winning Play in Spectrum Auctions

Feb 2009
Working Paper
By  Jeremy Bulow, Jonathan Levin, Paul Milgrom
We describe factors that make bidding in large spectrum auctions complex—including exposure and budget problems, the role of timing within an ascending auction, and the possibilities for price forecasting—and how economic and game-theoretic analysis can assist bidders in overcoming these problems. We illustrate with the case of the FCC's Advanced Wireless Service auction, in which a new entrant, SpectrumCo, faced all these problems yet managed to purchase nationwide coverage at a discount of roughly a third relative to the prices paid by its incumbent competitors in the same auction, saving more than a billion dollars.