Economic Theory Commons^™

Efficient Relocation Of Spectrum Incumbents, Peter Cramton, Evan Kwerel, John Williams

Peter Cramton

Changes in technologies and in consumer demands have made prior radio spectrum allocations far from efficient. To address this problem the FCC has recently reallocated spectrum for more flexible use in bands that are partially occupied by incumbent license holders. Often, it is necessary for the new license holder to relocate incumbents to make efficient use of the spectrum. Regulations structuring the negotiation between incumbent and new entrant can promote efficiency. In particular, giving the new entrant the right to move the incumbent with compensation can reduce negotiation costs and promote efficiency when there is private information about spectrum values …

Affidavit Of Peter Cramton, Peter Cramton

Peter Cramton

Reply to comments on review of rules. For ISO New England.

The Efficiency Of The Fcc Spectrum Auctions, Peter Cramton

Peter Cramton

From July 1994 to July 1996, the Federal Communications Commission (FCC) conducted nine spectrum auctions, raising about $20 billion for the U.S. Treasury. The auctions assigned thousands of licenses to hundreds of firms. Were the auctions efficient? Did they award the licenses to the firms best able to turn the spectrum into valuable services for consumers? There is substantial evidence that the FCC's simultaneous ascending auction worked well. It raised large revenues. It revealed critical information in the process of bidding and gave bidders the flexibility to adjust strategies in response to new information. As a result, similar licenses sold …

Efficient Relocation Of Spectrum Incumbents, Peter Cramton, Evan Kwerel, John Williams

Peter Cramton

Changes in technologies and in consumer demands have made prior radio spectrum allocations far from efficient. To address this problem the FCC has recently reallocated spectrum for more flexible use in bands that are partially occupied by incumbent license holders. Often, it is necessary for the new license holder to relocate incumbents to make efficient use of the spectrum. Regulations structuring the negotiation between incumbent and new entrant can promote efficiency. In particular, giving the new entrant the right to move the incumbent with compensation can reduce negotiation costs and promote efficiency when there is private information about spectrum values …

A Political Model Of Monetary Policy With Application To The Real Fed Funds Rate, Tony Caporale, Kevin B. Grier

Economics and Finance Faculty Publications

We construct an empirical model of U.S. monetary policy assuming that the Federal Reserve is an ordinary federal bureaucracy. We use the real Federal Funds rate as our policy measure and show the existence of significant executive, legislative, and bureaucratic influence on the real rate of interest from 1961 to 1996. We find that presidential party is an adequate statistical measure of executive influence and that the voting scores of the Senate Banking Committee leadership best represent legislative influence. We argue that political changes cause systematic and predictable changes in monetary policy.

A Review Of Iso New England's Proposed Market Rules, Peter Cramton, Robert Wilson

Peter Cramton

For ISO New England.

A Review Of Iso New England's Proposed Market Rules, Peter Cramton, Robert Wilson

Peter Cramton

This report reviews the proposed rules for restructured wholesale electricity markets in New England. We review the market rules, both individually and collectively, and identify potential problems that might limit the efficiency of these markets. We examine alternatives and identify the key tradeoffs among alternative designs. We believe that the wholesale electricity market in New England can begin on December 1, 1998. However, improvements are needed for long-run success. We have identified four major recommendations:

* Switch to a multi-settlement system.

* Introduce demand-side bidding.

* Adopt location-based transmission congestion pricing, especially for the import/export interfaces.

* Fix the pricing …

Ascending Auctions, Peter Cramton

Peter Cramton

A key question of auction design is whether to use an ascending-bid or a sealed-bid format. The critical distinction between formats is that an ascending auction provides the bidders with information through the process of bidding. This information is a two-edged sword. It may stimulate competition by creating a reliable process of price discovery, by reducing the winner’s curse, and by allowing efficient aggregations of items. Alternatively, the information may be used by bidders to establish and enforce collusive outcomes. Ex ante asymmetries and weak competition favor a sealed-bid design. In other cases, an ascending auction is likely to perform …

Essay I. Intra-Industry Contagion And Competitive Effects Associated With Corporate Liquidation Announcements: Does Shareholder Governance Influence The Results? Essay Ii. Investors' Pricing Of Exchange Rate Risk In U. S. Firms That File For Bankruptcy, J. Terry Ray

Theses and Dissertations in Business Administration

Essay I. Intra-industry contagion and competitive effects associated with corporate liquidation announcements: Does shareholder governance influence the results? This essay extends earlier research by investigating the role shareholder governance may play in the abnormal stock returns of the liquidating firms' competitors. The empirical model used for analyzing the abnormal returns includes variables to capture the influence of: leverage, Tobin's q, the Herfindahl index, Book Equity-to-Market Equity ratio, the level of institutional stock ownership, and the level of stock ownership by insiders.

The conclusion is leverage of the liquidating firm as well as its competitors is the major factor affecting the …

Simultaneous Ascending Auctions With Package Bidding, Peter Cramton, John Mcmillan, Paul Milgrom, Bradley Miller, Bridger Mitchell, Daniel Vincent, Robert Wilson

Peter Cramton

An effective package bidding mechanism addresses three problems: the exposure problem (the risks a bidder faces in trying to construct an efficiently large combination of licenses), the free-rider problem (the difficulties small bidders have in beating those who bid for larger packages of licenses), and the computational complexity problem (which arises from the fact that the number of possible combinations of licenses is much larger than the number of licenses). Package bidding offers the possibility of an improvement over individual-license bidding only when there are strong complementarities and the pattern of those complementarities varies across bidders. Package bidding works satisfactorily …

Auctioning Securities, Peter Cramton, Lawrence M. Ausubel

Peter Cramton

Treasury debt and other divisible securities are traditionally sold in either a pay-your-bid (discriminatory) auction or a uniform-price auction. We compare these auction formats with a Vickrey auction and also with two ascending-bid auctions. The Vickrey auction and the alternative ascending-bid auction (Ausubel 1996) have important theoretical advantages for sellers. In a setting without private information, these auctions achieve the maximal revenue as a unique equilibrium in dominant strategies. In contrast, the pay-your-bid, uniform-price, and standard ascending-bid auction admit a multiplicity of equilibria that yield low revenues for the seller. We show how these results extend to a setting where …

The Use Of Replacement Workers In Union Contract Negotiations: The U.S. Experience, 1980-1989, Peter Cramton, Joseph Tracy

Peter Cramton

It is argued in many circles that a structural change occurred in U.S. collective bargaining in the 1980s. Strike incidence declined, dispute incidence increased, and the composition of disputes shifted away from strikes and toward holdouts. We investigate the extent to which the hiring of replacement workers can account for these changes. For a sample of over 300 major strikes since 1980, we estimate the likelihood of replacements being hired. We find that the risk of replacement is lower for bargaining units with more experienced workers, and declines during tight labor markets. The composition of disputes shifts away from strikes …

Auctions And Takeovers, Peter Cramton

Peter Cramton

Under Delaware law (the predominant corporate law in the US), when a potential acquirer makes a serious bid for a target, the target's board of directors is required to act as would "auctioneers charged with getting the best price for the stock-holders at a sale of the company." (Revlon v. MacAndrews & Forbes, 173). The target's board may not use defensive tactics that destroy the auction process and must attempt to seek higher bids. Similarly, the Williams Act requires takeover bids to remain open for at least 20 business days on the grounds that the delay facilitates auctions. This preference …

The Fischer Black Hypothesis: Some Time-Series Evidence, Tony Caporale, Barbara Mckiernan

Economics and Finance Faculty Publications

We estimate an ARCH-M model to analyze the relationship between the conditional standard deviation of real gross national product (GNP) and its growth rate for the period 1871-1993. We find that variability significantly increases output growth rates. In addition, impulse response functions show that the effect of variability on growth rates is dynamic. These results provide evidence in favor of Black's (1987) business cycle hypothesis.