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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Friebel, Guido / Requate, Till / Tsui, Kevin / Wichardt, Philipp / Zulehner, Christine

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Collusive Bidding in the FCC Spectrum Auctions

Peter Cramton1 / Jesse A Schwartz2

1University of Maryland,

2Vanderbilt University,

Citation Information: Contributions in Economic Analysis & Policy. Volume 1, Issue 1, ISSN (Online) 1538-0645, DOI: 10.2202/1538-0645.1078, December 2002

Publication History

Published Online:
2002-12-02

Abstract

This paper describes the bid signaling that occurred in many of the FCC spectrum auctions. Bidders in these auctions bid on numerous spectrum licenses simultaneously, with bidding remaining open on all licenses until no bidder is willing to raise the bid on any license. Simultaneous open bidding allows bidders to send messages to their rivals, telling them on which licenses to bid and which to avoid. This “code bidding” occurs when one bidder tags the last few digits of its bid with the market number of a related license. We examine how extensively bidders signaled each other with retaliating bids and code bids in the DEF-block PCS spectrum auction. We find that only a small fraction of the bidders commonly used retaliating bids and code bids. These bidders won more than 40% of the spectrum for sale and paid significantly less for their overall winnings.

Keywords: Auctions; Collusion; Multiple Object Auctions; Spectrum Auctions

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