An Experimental Test of Design Alternatives for Spectrum Auctions with Communication Channels

• Název práce v češtině: Experimentální test alternativních designů aukcí frekvenčních pásem s komunikačními kanály
• Název v anglickém jazyce: An Experimental Test of Design Alternatives for Spectrum Auctions with Communication Channels
• Klíčová slova: kombinační aukce, aukce spektra, experimentální ekonomie, komunikace, koluze, třní nedostatky, telekomunikace
• Klíčová slova anglicky: combinatorial auctions, spectrum auctions, experimental economics, communication, collusion, market imperfection, telecommunications
• Akademický rok vypsání: 2011/2012
• Typ práce: diplomová práce
• Jazyk práce: angličtina
• Ústav: neurčeno (23-N)
• Vedoucí / školitel: doc. PhDr. Lubomír Cingl, Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 17.06.2012
• Datum zadání: 17.06.2012
• Datum a čas obhajoby: 24.06.2014 00:00
• Místo konání obhajoby: ies
• Datum odevzdání elektronické podoby: 16.05.2014
• Datum proběhlé obhajoby: 24.06.2014
• Oponenti: PhDr. Jiří Kukačka, Ph.D.

Seznam odborné literatury

Abbink, K., B. Irlenbusch, et al. (2005). "An experimental test of design alternatives for the British 3G/UMTS auction." European Economic Review 49(2): 505-530.
Banks, J., M. Olson, et al. (2003). "Theory, experiment and the federal communications commission spectrum auctions." Journal of Economic Behavior & Organization 51(3): 303-350.
Brunner, C., J. K. Goeree, et al. (2010). "An experimental test of flexible combinatorial spectrum auction formats." American Economic Journal: Microeconomics 2(1): 39-57.
Cramton, P. (2012). Spectrum Auction Design. Working paper, University of Maryland.
Cramton, P., Y. Shoham, et al. (2007). "An overview of combinatorial auctions." ACM SIGecom Exchanges 7(1): 3-14.
ČTÚ (2013). Vyhlášení výběrového řízení za účelem udělení práv k využívání rádiových kmitočtů k zajištění veřejné komunikační sítě v pásmech 800 MHz, 1800 MHz a 2600 MHz. Praha, Český telekomunikační úřad: 57.
De Vries, S. and R. V. Vohra (2003). "Combinatorial auctions: A survey." INFORMS Journal on computing 15(3): 284-309.
Eliaz, K., T. Offerman, et al. (2008). "Creating competition out of thin air: An experimental study of right-to-choose auctions." Games and Economic Behavior 62(2): 383-416.
Fan, C.-P. (2011). Taiwan’s Wimax License Auction – A Case Study of Government’s Role in Technology Progress. EGPA. Bucharest: 23.
Fischbacher, U. (2007). "z-Tree: Zurich toolbox for ready-made economic experiments." Experimental Economics 10(2): 171-178.
Friedman, D. and A. Cassar (2004). Economics Lab: An Intensive Course in Experimental Economics. London, Routledge.
Goeree, J. and L. Lindsay (2012). "Designing package markets to eliminate exposure risk." Available at SSRN 2047008: 20.
Goeree, J. K. and C. A. Holt (2010). "Hierarchical package bidding: A paper & pencil combinatorial auction." Games and Economic Behavior 70(1): 146-169.
Goeree, J. K., C. A. Holt, et al. (2006). "An experimental comparison of the FCC’s combinatorial and non-combinatorial simultaneous multiple round auctions." prepared for the Wireless Communications Bureau of the Federal Communications Commission.
Holt, C. A. (2005). Markets Games, and Strategic Behavior: Recipes for Interactive Learning, Unpublished Manuscript.
Milgrom, P. (2007). "Package auctions and exchanges." Econometrica 75(4): 935-965.

Předběžná náplň práce

Motivation

The mobile telecommunication sector in the Czech Republic can hardly be considered as a highly competitive. Only a handful of players which seem to keep an unwritten cartel agreement give evidence of it. However there is a flash of hope for the consumers in the nearest future. The Czech Telecommunications Office (CTO - the Czech regulator for telecommunications and postal services) published recently it would announce an auction for a new allocation of rights to mobile frequency spectrum intervals for the next 15 years. The result of this auction should lead to higher competition in the market and therefore to the gains for consumers. But will it be so? It depends on the auction type used by the CTO, on the execution of the auction itself and also on the auction results and future development of the market.

Several block intervals in the 800 MHz, 1800 MHz and 2600 MHz in paired spectrum and also 2600 MHz in unpaired spectrum will be auctioned. In the 1800 MHz paired spectrum (GSM technologies) the unallocated portion of the spectrum will be also offered for sale. This should ensure the entrance of new operator into the market. The upset prices in the auction will range from 24 up 1100 millions of Czech crowns per one block of the particular spectrum. The CTO plans to use the auction with two phases. In the first phase the SMRA-S type of auction will be performed. It is a simultaneous multiple round auction with possibility of renouncement of the highest bid. In the second phase the frequency intervals on the basis of profits from the first phase will be distributed. This will be done in form of selection of specific frequency segments or intervals ranked by the offered price with the right of priority selection.

The crucial question is whether this particular type of auction will be the most effective method from the point of view of the maximal revenues and auction results. And if not, what are the reasons of this? Insufficient verification of the particular auction type by the regulator? Corruption? Unprofessional approach of the authorities? As the mobile frequency spectrum intervals are considered a scarce resource, this auction is crucial for the future competition in the telecommunication market in the Czech Republic as well as it can bring substantial revenues to the state treasury. Because of these facts the spectrum auction in the Czech Republic should be definitely subject to detailed scientific examination.

Current state of the affairs

The Czech telecommunication spectrum auction is currently in its middle stage. In January 2011 the Government of the Czech Republic approved the methods and intention of the Czech Telecommunication Office in the matter of the managing the telecommunications spectrum (Usnesení vlády ČR č.78/2011 sb.). Based on this resolution the CTO started the preparation phase of the auction. In this preparation phase it compiled the proposal of principles of the public tender, which was published on the 1st September 2011 on the CTO’s web page. This stage resulted in the first quarter of 2012, when the public tender for purpose of allocation of rights to use the particular telecommunication frequencies was published on 20th March (Český telekomunikační úřad, 2012).

According to this document the CTO should finally announce the tender on 22nd June 2012. The dates set by the CTO are only provisional, but the deadline for the delivery of applications to this tender should be at the beginning of the August 2012. The auction itself should be performed at the end of the November 2012 and the announcement of the results of the auction phase at the beginning of the December 2012. The Czech Telecommunications Office then has to grant the rights until the end of December 2012. All the dates can be found in the documentation to the public tender (Český telekomunikační úřad, 2012). According to the importance and complexity of the Czech telecommunications spectrum auction I suppose that a certain delay in the deadlines can be expected.

Importance of Experimental Approach

Academicians as well as authorities often examine efficiency and revenues not only of the spectrum auctions. The problem is, that real auctions typically brigs different results than theoretically predicted. The evaluation of auction outcome is therefore a very interesting question. For this purpose an experimental approach is normally used. It seems to be a common practice in the United States (Banks, et al., 2003, Goree, et al., 2006), but also in Britain (Abbink, 2005) or Taiwan (Chinn-Ping Fan, 2011). Moreover the current literature shows that the results vary with same types but different settings of the auctions (Holt, 2006). Therefore performance of the specific economic experiment with exact settings and parameters is important in each particular case.

In the thesis I would like to carry out such experiment in the specific setup of the Czech environment. Furthermore I would like to compare the specific auction type used by the Czech Telecommunications Office to three other most suitable auction settings as in Brunner, et al. (2010). Using a proper experimental design and subjects I would like to compare the outcomes, revenues and efficiency of examined auction types. By this procedure I would like to evaluate the appropriateness of finally used settings in the Czech spectrum auction.

Předběžná náplň práce v anglickém jazyce

According to the thesis proposal, I would like to conduct a full-computerized laboratory experiment. The design of this experiment as well as the number of participants and other details will depend on the specific setup of the Czech telecommunication spectrum auction announced by the Czech telecommunications office. The CTO planes to use the SMRA-S type of auction in the first stage. It is a simultaneous multiple round auction with possibility of renouncement of the highest bid. In the second stage of the spectrum auction the frequency intervals on the basis of profits from the first phase will be distributed. This will be done in the form of selection of specific frequency segments or intervals ranked by the offered price in the auction with the right of priority selection by the winners. I would like to compare the SMRA-S type of auction with other possible ones as the Brunner et al. (2010) did in their paper. They found, that the combinatorial auction formats clearly differ both in terms of efficiency and sellers revenue. The SMR auction types have not perform the best among other examined alternatives in their work. Therefore I would like to include other types of the auction as well (Combinatorial Clock type, Resource Allocation Design...).

Prior to the experiment itself I would like to run a pilot-version to verify the structure of the experiment and calibrate the tasks. The number of sessions and total number of participants will depend on the design of the experiment as well as the funding possibilities. After the experiment I will process the gained data by proper econometric methods.

Moreover I would like to place my thesis into the institutional framework of antitrust economics and theory of regulation. Through this the degree and improvement of competition on the Czech telecommunications market can be studied and the functioning of the regulator can be put in question. I would like to provide simple tests for market concentration such as Herfindahl indices before and after the auction in the thesis. The assessment of structure of the market and its functioning should also be included.