Auctions
| Case: Hild, M., Dwidevy, A., and Raj, A., 2004, “The Biggest Auction Ever: 3G Licensing in Western Europe”, Darden Business Publishing
Discussion question: What are the alternatives to auctions? |
Textbook Reading: Chapter 3 (Intro and Section 3.3; pp. 65-67 and pp.83-89) and Chapter 12 (Section 12.4; pp. 434-437
In this lecture video Tim Roughgarden “provides a detailed case study of the 2016-2017 Federal Communications Commission incentive auction for repurposing wireless spectrum”. It demonstrates how economics, computer science and business can coincide to solve complete real world problems. For a short overview of the success of spectrum auctions, see here:
| Instructor resource: The Biggest Auction Ever: What Happened Next?, February 2019 + |
You can test you knowledge of this session with this quiz.
This video introduces two key concepts: the Coase theorem, and the transitional gains trap.
In the past I have used an assignment where I asked students to link together the concepts from the video with the 3G license auction. Here is a great example of their work:
Extra activity: The Dutch flower auction
Application:
When NPR decided to create a book version of their popular podcast, Planet Money, they auctioned off the rights to publish it. They used a multiple round sealed bid auction to whittle down the candidates to just two options: a “big five” publisher, and WW Norton. At that point they utilised a beauty contest to judge a variety of non financial factors. The bigger company offered the following: “more actual money upfront, a full court publicity press, and a tried-and-true way of getting the book into airport and indie bookstores around the country”. Norton offered less money but a full colour print and access to educational courseware and textbooks. due to the educational mission of the organization, they chose the latter.
For more, listen to “Inside a BOOK auction”, Planet Money, March 21st 2026
Recommended reading:
- The Bidding game, National Academy of Sciences, March 2003 – A good, short, overview of auction theory and practice.
- Also: McMillan, J., 2002 “Come bid!” (pp. 75-88 and 68-72) in Reinventing the Bazaar
| Learning Objectives: To consider how auctions compare to other allocation mechanisms. To understand different types of auction and apply them to real examples.
Cutting edge theory: Auctions are used in e-commerce Focus on diversity: An expert on applied auction formats, Susan Athey was the first female winner of the John Bates Clark medal. She has been an advisor to Microsoft and you can follow her on Twitter here. Spotlight on sustainability: How governments can use beauty contests to mitigate the environmental impact of infrastructure spending |