| Currently, many governments use auctions to allocate licenses to operate in a market. Well known examples include the sale of oil drilling rights, landing slots at airports, and gas stations along highways. How much money may be generated by setting such "privileged positions" was demonstrated by last year's European UMTS spectrum auctions, which raised over 80 billion dollars. License auctions differ from standard auctions for consumer goods in that they may change the nature of the market's competitive landscape, and economists have only recently begun to investigate their efficiency and revenue-generating properties. In this project I will address many practical and theoretical issues related to license auctions, relying on both experimental and theoretical methods. For example, scarce licenses to use a new technology are often sold among existing market parties (incumbents) and potential entrants. When the incumbent firms have (strong) advantages over newcomers, standard auctions may perform rather poorly in terms of revenue. One goal of this project is to evaluate tbc revenue-generating properties of alternative auction formats such as the English auction, first-price auction, and premium auctions, which are explicitly designed to stimulate aggressive bidding by weaker bidders. A related question that I will address is how efficient these formats are when the licenses for sale exhibit both private and common values. Finally, I will investigate the "long-term" effects of auctions. For exampie, the level of product innovation or Research and Development (R&D) that firms employ may depend on the price they have to pay tor the license. I will compare the effects of several alternative allocation mechanisms (such as auctions, lotteries, and beauty contests) on R&D investments and society's welfare. The aforementioned research questions fill very well in CREED's main objective, i.c. to study economic problems, in particular those related to political decision making, using laboratory experimentation. |
