Endogenous Entry and Realized Prices in National 3G Spectrum Auctions

This paper examines the relationships between spectrum auction design and the prices paid for national 3G wireless licenses. Of particular interest is how auction features that can be modified by policy-makers determine prices paid for spectrum. Our theoretical and empirical analysis is based on the premise that auction design features affect both final and intermediate auction outcomes, such as revenues, auction competitiveness, and license assignments. It recognizes, and explicitly allows for, the endogeneity of bidder entry and sample selection arising from an absence of bidding. The analysis shows that flexible-package formats were associated with higher prices, and that higher reserve prices had a dampening effect. It also shows that longer license terms and more competitive auctions were associated with higher spectrum prices