Rev Ind Organ (2013) 42:161–190
Spectrum Auction Design
Published online: 1 February 2013
© Springer Science+Business Media New York 2013
Abstract Spectrum auctions are used by governments to assign and price licenses
for wireless communications. The standard approach is the simultaneous ascending
auction, in which many related lots are auctioned simultaneously in a sequence of
rounds. I analyze the strengths and weaknesses of the approach with examples from
US spectrum auctions. I then present a variation-the combinatorial clock auction-
which has been adopted by the UK and many other countries, which addresses many
of the problems of the simultaneous ascending auction while building on its strengths.
The combinatorial clock auction is a simple dynamic auction in which bidders bid on
packages of lots. Most importantly, the auction allows alternative technologies that
require the spectrum to be organized in different ways to compete in a technology-
neutral auction. In addition, the pricing rule and information policy are carefully
tailored to mitigate gaming behavior. An activity rule based on revealed preference
promotes price and assignment discovery throughout the clock stage of the auction.
Truthful bidding is encouraged, which simpliﬁes bidding and improves efﬁciency.
Experimental tests and early auctions conﬁrm the advantages of the approach.
Keywords Auctions · Spectrum auctions · Market design · Package auction ·
Clock auction · Combinatorial auction
JEL Classiﬁcation D44 · C78 · L96
Fred Kahn recognized the important role of market design in improving how markets
work. He believed that prices should be set in an open competitive process, rather than
P. Cramton (
Department of Economics, University of Maryland, College Park, MD, USA