Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 10

The FCC has hired you as a consultant to design an auction to sell wireless spectrum rights. The FCC indicates that its goal of using auctions to sell these spectrum rights is to generate revenue. Since most bidders are large telecommunications companies, you rationally surmise that all participants in the auction are risk neutral. Which auction type-first-price, second-price, English, or Dutch-would you recommend if all bidders value spectrum rights identically but have different estimates of the true underlying value of spectrum rights? Explain.