Social and Behavioral Sciences Commons^™

Using Spectrum Auctions To Enhance Competition In Wireless Services, Peter Cramton, Evan Kwerel, Gregory Rosston, Andrzej Skrzypacz1

Peter Cramton

Spectrum auctions are used by governments to assign and price licenses for wireless communications. Effective auction design recognizes the importance of competition, not only in the auction, but in the downstream market for wireless communications. This paper examines several instruments regulators can use to enhance competition and thereby improve market outcomes.

Letter To Deputy Administrator Blum (Cms) On Medicare Auction, Peter Cramton

Peter Cramton

No abstract provided.

Reducing Healthcare Costs Requires Good Market Design, Peter Cramton, Brett Katzman

Peter Cramton

No abstract provided.

Letter From 167 Concerned Auction Experts On Medicare Competitive Bidding Program, Peter Cramton

Peter Cramton

No abstract provided.

Wind Energy In Colombia: A Framework For Market Entry, Peter Cramton, Walter Vergara, Alejandro Deeb, Natsuko Toba, Irene Leino

Peter Cramton

The purpose of this report is to provide decision makers in Colombia (and by extension other countries or regions), who are considering the deployment or consolidation of wind power, with a set of options to promote its use. The options presented are the result of an analysis of the Colombian market; this analysis included simulations and modeling of the country’s power sector, and extensive consultations with operators, managers, and agents. More information on the analysis and simulations is presented in the appendixes. Wind was chosen to exemplify the range of renewable energy alternatives available to complement traditional power sector technologies …

Using Forward Markets To Improve Electricity Market Design, Peter Cramton, Lawrence Ausubel

Peter Cramton

Forward markets, both medium term and long term, complement the spot market for wholesale electricity. The forward markets reduce risk, mitigate market power, and coordinate new investment. In the medium term, a forward energy market lets suppliers and demanders lock in energy prices and quantities for one to three years. In the long term, a forward reliability market assures adequate resources are available when they are needed most. The forward markets reduce risk for both sides of the market, since they reduce the quantity of energy that trades at the more volatile spot price. Spot market power is mitigated by …

Virtual Power Plant Auctions, Peter Cramton, Lawrence Ausubel

Peter Cramton

Since their advent in 2001, virtual power plant (VPP) auctions have been implemented widely. In this paper, we describe the simultaneous ascending-clock auction format that has been used for virtually all VPP auctions to date, elaborating on other design choices that most VPP auctions have had in common as well as discussing a few aspects that have varied significantly among VPP auctions. We then evaluate the various objectives of regulators in requiring VPP auctions, concluding that the auctions have been effective devices for facilitating new entry into electricity markets and for developing wholesale power markets.

A Two-Sided Auction For Legacy Loans, Peter Cramton

Peter Cramton

On Monday, 23 March 2009, Treasury Secretary Geithner presented the Public-Private Investment Program as a key instrument to resolve the financial crisis (www.financialstability.gov). The Treasury’s description still leaves many issues unanswered. We flesh out the auction design for legacy loans. A two-sided auction is required. Both banks and private investors must compete in a transparent and competitive process.

Foreword To Ross Baldick's 'Single Clearing Price In Electricity Markets', Peter Cramton

Peter Cramton

Argues that consumers and suppliers are better off with the clearing-price auction in electricity markets.

How Best To Auction Natural Resources, Peter Cramton

Peter Cramton

I study the design of auctions of natural resources, such as oil or mineral rights. A good auction design promotes both an efficient assignment of rights and competitive revenues for the seller. The structure of bidder preferences and the degree of competition are key factors in determining the best design. With weak competition and additive values, a simultaneous first-price sealed-bid auction may suffice. With more complex value structures, a dynamic auction with package bids, such as the clock-proxy auction, likely is needed to promote the efficiency and revenue objectives. Bidding on production shares, rather than bonuses, typically increases government take …

Auctioning The Digital Dividend, Peter Cramton

Peter Cramton

I begin by describing some of the problems of the simultaneous ascending auction. Then I present the package clock auction, which retains the benefits, while addressing the weaknesses, of the simultaneous ascending auction. I emphasize two essential elements of the package clock auction: the pricing rule and the activity rule. Along the way, I summarize both experimental and field results with the package clock auction.

Report On Key Design Elements Of Auctions Under Australia's Carbon Pollution Reduction Scheme, Peter Cramton

Peter Cramton

No abstract provided.

Auctions For Injecting Bank Capital (Addendum To 'A Troubled Asset Reverse Auction'), Peter Cramton, Lawrence M. Ausubel

Peter Cramton

Public discussion has turned, in the past few days, toward using some of the $700 billion in rescue funds for the injection of government money into banks in return for ownership stakes. The purpose of this short note, an addendum to “A Troubled Asset Reverse Auction,” is to describe an auction mechanism suitable for injections of capital into banks. The auctions would price the equity purchases through a competitive process.

Auctioning Long-Term Gas Contracts In Colombia, Peter Cramton

Peter Cramton

This paper presents an approach to auctioning long-term gas contracts in Colombia. I propose an annual auction for long-term firm gas contracts. The auction would assign and price all firm gas contracts, with the exception of gas from the Guajira field, which is assigned administratively at a regulated price. The proposal is a partial market design in that it does not address the transportation of gas from producer to consumer.

The goal of the approach is to improve the transparency and efficiency of the gas market with a coordinated auction for long-term gas contracts. Currently, gas contracts are sold in …

A Review Of The L-Band Auction, Peter Cramton

Peter Cramton

In May 2008, Ofcom’s L-band auction concluded. This was Ofcom’s second combinatorial clock auction. The auction used an innovative format intended to encourage an efficient assignment of the 17 lots. Eight bidders competed for the lots. In sharp contrast to the first combinatorial clock auction, the 10-40 GHz auction, in which each of the ten bidders won spectrum, in the L-band auction there was a single winner—Qualcomm won all the lots. This note briefly reviews the auction.

A Troubled Asset Reverse Auction, Peter Cramton, Lawrence M. Ausubel

Peter Cramton

The US Treasury has proposed purchasing $700 billion of troubled assets to restore liquidity and solve the current financial crisis, using market mechanisms such as reverse auctions where appropriate. This paper presents a high-level design for a troubled asset reverse auction and discusses the auction design issues. We assume that the key objectives of the auction are to: 1) provide a quick and effective means to purchase troubled assets and increase liquidity; 2) protect the taxpayer by yielding a price for assets related to their value; and 3) offer a transparent rules-based process that minimizes discretion and favoritism. We propose …

The Quadratic Core-Selecting Payment Rule For Combinatorial Auctions, Peter Cramton, Robert Day

Peter Cramton

We report on the use of a quadratic programming technique in recent and upcoming spectrum auctions in Europe, and proposed for use in the FAA’s landing-slot auctions in the United States. Specifically, we compute a unique point “in the core” that minimizes the sum of squared deviations from the Vickrey-Clarke-Groves payments. Analyzing the Karush-Kuhn-Tucker conditions, we demonstrate that the resulting payments can be decomposed into a series of economically meaningful and equitable penalties, adding to the perceived “fairness” of this payment rule. Further, we discuss the many benefits of this combinatorial auction paradigm.

A Review Of The 10-40 Ghz Auction, Peter Cramton

Peter Cramton

In February 2008, Ofcom’s 10-40 GHz auction concluded. This was Ofcom’s first combinatorial clock auction. The auction used an innovative format intended to encourage an efficient assignment of the 27 lots. Each of the ten bidders won one or more lots. All 27 lots were assigned. This note briefly reviews the auction.

Esop Fables: The Impact Of Employee Stock Ownership Plans On Labor Disputes, Peter Cramton, Hamid Mehran, Joseph Tracy

Peter Cramton

By the early 1990s employee stock ownership plans (ESOPs) had become as prevalent in unionized firms as in nonunionized firms. However, little research has been devoted to examining the implications of ESOPs for collective bargaining, or cross ownership more generally. In this paper, we extend the signaling model of Cramton and Tracy (1992) to allow partial ownership by the union. We demonstrate that ESOPs create incentives for unions to become weaker bargainers. As a result, the model predicts that ESOPs will lead to a reduction in strike incidence and in the fraction of labor disputes that involve a strike. We …

Market Design: Auctions And Matching, Peter Cramton

Peter Cramton

No abstract provided.

Innovation And Market Design, Peter Cramton

Peter Cramton

Market design plays an essential role in promoting innovation. I examine emission allowance auctions, airport slot auctions, spectrum auctions, and electricity markets, and demonstrate how the market design can encourage innovation. Improved pricing information is one source of innovation. Enhancing competition is another driver of innovation seen in all of the applications. Market design fosters innovation in other ways as well by addressing other potential market failures.

Forward Reliability Markets: Less Risk, Less Market Power, More Efficiency, Peter Cramton, Steven Stoft

Peter Cramton

A forward reliability market is presented. The market coordinates new entry through the forward procurement of reliability options—physical capacity bundled with a financial option to supply energy above a strike price. The market assures adequate generating resources and prices capacity from the bids of competitive new entry in an annual auction. Efficient performance incentives are maintained from a load-following obligation to supply energy above the strike price. The capacity payment fully hedges load from high spot prices, and reduces supplier risk as well. Market power is reduced in the spot market, since suppliers enter the spot market with a nearly …

The Effect Of Incumbent Bidding In Set-Aside Auctions: An Analysis Of Prices In The Closed And Open Segments Of Fcc Auction 35, Peter Cramton, Allan T. Ingraham, Hal J. Singer

Peter Cramton

This paper examines the impact of an incumbent carrier’s participation in two simultaneously conducted auctions: one set-aside for non-incumbents and one open to all carriers. This paper estimates the extent to which prices in the closed auction were inflated by the participation of incumbents. This paper also estimates what prices would have been in the open auction had incumbents been excluded from bidding in the closed. It is found that an incumbent’s participation in the closed auction through a front, Alaska Native, enabled it to win more licenses at lower prices in FCC Auction 35. In contrast, non-incumbents won fewer …

An Overview Of Combinatorial Auctions, Peter Cramton, Yoav Shoham, Richard Steinberg

Peter Cramton

No abstract provided.

Comments On The Rggi Market Design, Peter Cramton

Peter Cramton

No abstract provided.

The 700 Mhz Spectrum Auction: An Opportunity To Protect Competition In A Consolidating Industry, Peter Cramton, Andrzej Skrzypacz, Robert Wilson

Peter Cramton

This paper is provided in connection with the 2007 Telecommunications Symposium – Voice, Video and Broadband: The Changing Competitive Landscape and Its Impact on Consumers, sponsored by the Antitrust Division of the U.S. Department of Justice (“the Division”). Our focus is on the state of competition in the wireless sector. Maintaining a competitive wireless sector is particularly critical if, as the Division’s agenda indicates, wireless services are to function as a competitive alternative to wireline technologies. Strengthening competition is especially important now after recent mergers that consolidated the wireless industry into a few dominant firms (two to four depending on …

Comments On The Fcc’S Proposed Competitive Bidding Procedures For Auction 73, Peter Cramton, Gregory Rosston, Andrzej Skrzypacz, Robert Wilson

Peter Cramton

No abstract provided.

Possible Design For A Greenhouse Gas Emissions Trading System, Peter Cramton

Peter Cramton

No abstract provided.

Colombia’S Forward Energy Market, Peter Cramton

Peter Cramton

This paper presents a market design for Colombia’s forward energy market, which is scheduled to began in 2008. The forward energy market is an organized market to procure energy for electricity customers on a forward basis. It includes both the regulated market (residential and other small customers) and the nonregulated market (large customers). Currently, regulated customers represent 68% of the total electricity demand and nonregulated customers represent the remaining 32%. The proposed design is novel in that it integrates both the regulated and nonregulated customers into a single organized market. Although the regulated and nonregulated energy products remain distinct, their …

Affidavit Of Peter Cramton, Peter Cramton

Peter Cramton

Affidavit arguing that HQ manipulated the NYISO TCC and day-ahead energy markets. On behalf of DC Energy, LLC.