Economics Dictionary of ArgumentsHome
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| Auctions: Auctions are public sales where goods or services are offered to the highest bidder. Various types exist, like ascending (English), descending (Dutch), or sealed-bid formats. Auctions are used in diverse industries, from art and real estate to online marketplaces, facilitating efficient price discovery and allocation of items. See also Markets, Price, Allocation._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Economic Theories on Auctions - Dictionary of Arguments
Kiesling I 31 Auctions/Economic theories/Kiesling: Exampel spectrum allocation: Early auctions covered mobile phone frequencies, and mobile operators interested in building a network would bid on several licenses. Depending on which licenses they got, the subjective value of other licenses could change, and efficient allocation entailed changing their bids to reflect that changing value. Moreover, as a new market, price discovery was important yet there were few comparable markets, so an information-rich auction design helped facilitate price discovery (it could also facilitate collusion, but Cramton (1996)(1) found little evidence of meaningful collusion). Several auction theorists collaborated to design a new auction for these early spectrum auctions, called a “simultaneous multiple round auction” (SMRA) (McMillan, 1994)(2). SMRA: In an SMRA, participants bid simultaneously on the set of available licenses, and bids are observable to all participants. Each round is timed, and licenses with multiple offers have their prices increased in the next round. Bidding continues until all licenses have no further bidding activity. Simultaneous bids combined with multiple rounds enable participants to move among licenses to create the license combinations to build their networks. The SMRAs were successful at efficiently allocating licenses, getting licenses in the hands of operators who could build out the cellular networks that helped transform our economy into a digital one. Since 1994, spectrum auctions have created new, valued products and services, enhancing economic welfare and enabling communications firms to profit from creating innovative uses of the radio spectrum. They have also created considerable revenue for the federal government (see Hazlett, Porter, and Smith, 2011(3), and Hazlett, 1990(4) for overviews of Coase’s influence on spectrum license property rights). >Property rights/Coase. Kiesling I 32 Problem: VsSMRA: The SMRA is prone to a problem called the exposure problem. Many licenses are complements to each other in creating a viable network, and at the end of the auction an operator might lack some essential licenses to enable business viability. That complementarity means that the licenses have interdependent values. Clock auction: In 2006 Ausubel, Cramton, and Milgrom (2006)(5) introduced a combinatorial clock auction that enabled participants to incorporate these complementarities and reduce the exposure problem while retaining the beneficial features of the SMRA. Revised combinatorial clock auction designs are now used widely worldwide (Milgrom, 2019(6): 392). >Spectrum allocation/Coase, >Auctions/Coase. 1. Cramton, Peter (1997). The FCC Spectrum Auctions: An Early Assessment. Journal of Economics & Management Strategy 6, 3: 431-495. 2. McMillan, John (1994). Selling Spectrum Rights. Journal of Economic Perspectives 8, 3: 145-162. 3. Hazlett, Thomas W., David Porter, and Vernon L. Smith. “Radio Spectrum and the Disruptive Clarity of Ronald Coase.” Journal of Law and Economics, 54.4 part 2 (2011): S125-S165. doi: 10.1086/662992 4. Hazlett, Thomas W. (1990). The Rationality of U. S. Regulation of the Broadcast Spectrum. The Journal of Law and EconomicsVolume 33, Number 1 5. Ausubel, Lawrence M., Peter Cramton, and Paul Milgrom. (2006). The Clock-Proxy Auction: A Practical Combinatorial Auction Design. Handbook of Spectrum Auction Design: 120-140. 6. Milgrom, Paul (2019). Auction Market Design: Recent Innovations. Annual Review of Economics 11: 383-405._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Economic Theories Kiesling I L. Lynne Kiesling The Essential Ronald Coase Vancouver: Fraser Institute. 2021 |
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