Wireless Network Design: Optimization Models and Solution ...

7 Spectrum Auctions 151
also decide whether to have that reserve price revealed before the auction begins or
have it disclosed only when it need be enforced.
In many high-stakes auctions, prior to the beginning of the auction, the auctioneer
has a qualification stage. In this stage, bidders must prove that they are qualified
both monetarily and have the skills to fulfill whatever obligations go along with the
leasing/owning of the property.
As stated earlier, throughout this chapter, we will assume that we are seeking an
auction format that is appropriate for problems where bidders need to procure a collection
of items in order to have a viable business plan. When describing the history
of spectrum auctions, we will highlight the success or failure of specific designs at
satisfying some or all of the possible goals of a telecommunications regulator. Such
goals may include:
1. The bidders understand what they are buying, i.e. the property rights are well
defined. A fully-described property right will include the ways in which the item
can be used, the time-period of use, the termination process for misuse or lack of
payment, the right of the owner/lessee to sub-let/sell the right, the obligations of
the lease holder, etc.
2. Bidders are able to, through their bids, announce the entire collection of objects
that they need.
3. The auction results in reasonable revenue to the seller.
4. The auction results in an efficient outcome i.e. all items are collectively allocated
to the bidders that value these items the most.
5. The auction is perceived as fair.
6. The auction ends in a reasonable amount of time.
7. The auction has limited transaction costs, i.e. the rules are not so difficult or the
bidding so complicated that a straightforward bidder finds it difficult to participate.
8. The auction design discourages gaming and signaling.
9. The auction allows price discovery, since such auctions often bring more participation.
10. The auction is computationally feasible and scalable.
11. The auction satisfies, through its rules, any social welfare outcomes that are desired
by the public entity selling or leasing the item.
It is not possible to have all such attributes simultaneously. For certain applications,
some of these goals will be more important than others. For more on what
really matters in auction design, we recommend the paper by Klemperer [32] who
maintains:
What really matters in auction design are the same issues that any industry regulator would
recognize as key concerns: discouraging collusive, entry-deterring and predatory behavior.
In short, good auction design is mostly good elementary economics.
In addition, the auction mechanism should consider any application-specific issues
that might arise. For example, an auction design might consider how market
power impacts the outcome, whether there will be sufficient participation, and