Theory, experiment and the federal communications commission spectrum auctions

The FCC uses the simultaneous multi-round auction (SMA) to assign spectrum licenses. Congress mandated that the SMA be compared to an auction that allows "combinatorial" bids. We review the theoretical and experimental evidence relevant to the SMA procedures and their inherent defects. Results from experiments evaluating the SMA in comparison to a combinatorial auction designed by Charles River and Associates show that several of the SMA rules hinder efficiency and create a trade-off between efficiency and auction length. The combinatorial auction outperforms the SMA when license values are superadditive, but requires more time to complete and is not robust. (C) 2002 Elsevier Science B.V. All rights reserved.