Skip to main content
Article
Collusive Bidding: Lessons from the FCC Spectrum Auctions
Journal of Regulatory Economics (2000)
  • Peter Cramton, University of Maryland
  • Jesse Schwartz, Vanderbilt University
Abstract

The Federal Communications Commission (FCC) spectrum auctions use a simultaneous ascending auction design. Bidders bid on numerous communication licenses simultaneously, with bidding remaining open on all licenses until no bidder is willing to bid higher on any license. With full revelation of bidding information, simultaneous open bidding allows bidders to send messages to their rivals, telling them on which licenses to bid and which to avoid. These strategies can help bidders coordinate a division of the licenses, and enforce the proposed division by directed punishments. We explore the extent that bidders signaled each other with retaliating bids in recent FCC spectrum auctions. These strategies were used frequently by a small fraction of the bidders, and were sometimes effective. Direct estimates of revenue losses from these practices are inconclusive; however, bidders that used these collusive bidding strategies paid significantly less, suggesting that the indirect losses may be much larger. We examine solutions to mitigate collusive bidding in the spectrum auctions, and then apply these ideas to the design of daily electricity auctions.

Publication Date
May, 2000
Citation Information
Peter Cramton and Jesse Schwartz. "Collusive Bidding: Lessons from the FCC Spectrum Auctions" Journal of Regulatory Economics Vol. 17 (2000)
Available at: http://works.bepress.com/jesse_schwartz/7/