Yaari-Tikochinsky, Osnat; (2005) Promoting entry in telecom auctions. Doctoral thesis , UCL (University College London).

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Abstract

This study is situated at the junction between the theoretical and the practical aspects of auction theory. We are particularly interested in the question of participation (or entry) of bidders in auctions. This is essentially a theoretical question, however the motivation for studying it stems from the observation of real auction situations. In the case of high-profile telecom auctions - auctions of licences for operating telecommunications technology - the problem of bidder participation poses a particularly acute challenge, that needs to be addressed in the design of the auction. The thesis contains five chapters; first an introduction that follows the appearance of the entry-problem in telecom auctions, and the motivation for studying it is provided (chapter 1), then the related theoretical literature is surveyed (chapter 2). The main body of the thesis is brought in chapters 3,4 and 5. Chapters 3 develops a theoretical model in which the use of royalty-bidding in telecom auctions is studied. The aim of capturing the main aspects of a real-life telecom auction environment, imposes a certain structure on the task of modelling it for the purpose of theoretical analysis. Our main interest is to examine whether the entry of weak bidders (in telecom auctions these are usually newcomers), could be promoted by the introduction of royalties to the auction, and to study the effects of such actions on other participants in the market. For that purpose a 'second-price royalty auction with a fixed-fee element' is modelled. Chapter 4 expands the analysis of chapter 3 by changing the basic setting of the model. In particular, the assumptions at the basis of the model, regarding the knowledge at the auctioneer's disposal when she designs the auction, are made less restrictive. In chapter 5 we abandon the use of royalties in auctions altogether, and turn to an experimental examination of the question of entry within two of the most common auction formats in the telecom industry - the ascending price auction and the first-price sealed bid auction. Our aim in this chapter is to compare the entry-promoting properties of the two auctions by observing the entry behaviour of bidders in a monitored environment where the only variable is the auction format.

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