Hostname: page-component-89b8bd64d-dvtzq Total loading time: 0 Render date: 2026-05-12T21:57:53.652Z Has data issue: false hasContentIssue false
  • English
  • Français

A tale of two auctions

Published online by Cambridge University Press:  01 April 2008

EDWARD NIK-KHAH
EDWARD NIK-KHAH*
Affiliation:
Roanoke College, Salam, Virginia
*
*Correspondence to: Department of Business and Economics, Roanoke College, Salem, VA 24153, USA. Email: nik@roanoke.edu
Get access Rights & Permissions [Opens in a new window]

Abstract

Advocates for a ‘different and innovative approach’ to conceptualizing markets have argued that it is possible to reengineer markets to deliver any number of salutary public policy goals. These ‘consulting engineers for the market economy’ have supported their ambitions by referring to the participation of game theorists in the design and implementation of spectrum auctions. However, the variegated and inconsistent lessons drawn from their participation indicate that the role game theorists actually played in the auctions is not well understood. The confusion appears to stem from significant omissions in the available (mostly first-hand) accounts, which are boastful in taking credit for the performance of the auctions but strangely demure in recounting the precise measures undertaken to bring it about. In this paper, I provide an unexpurgated account of the circumstances surrounding the participation of game theorists in the most celebrated of spectrum auctions, those held under the auspices of the US Federal Communications Commission (FCC). Using the FCC's archival records, I recover the suppressed role of the commercial funding of economic research in determining both the extent and the nature of the economists' participation. This analysis emphasizes the crucial importance of the method of funding in determining how economic research is brought to bear on public policy.

Information

Type
Research Article
Information
Journal of Institutional Economics , Volume 4 , Issue 1 , April 2008 , pp. 73 - 97
Copyright
Copyright © The JOIE Foundation 2008

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

Andrews, E. (1994), ‘2 Phone concerns seeing to merge wireless services’, New York Times, 29 June: A1.Google Scholar
Ashenfelter, O. (1989), ‘How auctions work for wine and art’, Journal of Economic Perspectives, 3 (3): 23–36.CrossRefGoogle Scholar
Ausubel, L. and Milgrom, P. (2005), ‘Ascending proxy auctions’, in Cramton, P., Shoham, Y., and Steinberg, R. (eds), Combinatorial Auctions, Cambridge, MA: MIT Press, pp. 79–98.CrossRefGoogle Scholar
Banks, J., Ledyard, J., and Porter, D. (1989), ‘Allocating uncertain and unresponsive resources: an experimental approach’, RAND Journal of Economics, 20 (1): 1–25.CrossRefGoogle ScholarPubMed
Banks, J., Olson, M., Porter, D., Rassenti, S., and Smith, V. (2003), ‘Theory, experiment, and the Federal Communications Commission spectrum auctions’, Journal of Economic Behavior and Organization, 51 (3): 303–350.CrossRefGoogle Scholar
Barry, A., Osborne, T., and Rose, N. (eds) (1996), Foucault and Political Reason, Chicago: University of Chicago Press.Google Scholar
Barry, A. and Slater, D. (2003), ‘Technology, politics and the market: an interview with Michel Callon’, Economy and Society, 31 (2): 285–306.CrossRefGoogle Scholar
Benkler, Y. (1998), ‘Overcoming agoraphobia’, Harvard Journal of Law and Technology, 11 (2): 287–400.Google Scholar
Binmore, K. (2002), ‘The UK telecom auction: did we get it right?’, Market and Public Organisation, 7: 1–3.Google Scholar
Binmore, K. (2004), ‘A review of Philip Mirowski's Machine Dreams’, Journal of Economic Methodology, 11 (4): 477–513.Google Scholar
Burchell, G., Gordon, C., and Miller, P. (eds) (1991), The Foucault Effect, Chicago: University of Chicago Press.CrossRefGoogle Scholar
Bykowsky, M. and Cull, R. (1993), ‘Issues in implementing a personal communications services auction’, NTIA Office of Policy Analysis and Development Staff Paper, FCC PP Docket No. 93-253.Google Scholar
Bykowsky, M. and Cull, R. (1994), ‘Personal communications services auction: further analysis’, NTIA Office of Policy Analysis and Development Staff Paper, FCC PP Docket No. 93-253.Google Scholar
Bykowsky, M., Cull, R., and Ledyard, J. (2000), ‘Mutually destructive bidding: the FCC auction design problem’, Journal of Regulatory Economics, 17 (3): 205–228.CrossRefGoogle Scholar
CNN Business Morning (1994), RTV Reports, 6 December.Google Scholar
Callon, M. (2007), ‘What does it mean to say that economics is performative?’, in MacKenzie, D., Muniesa, F., and Siu, L.. (eds), Do Economists Make Markets? Princeton, NJ: Princeton University Press, pp. 311–357.Google Scholar
Copps, M. (2004), ‘Statement of Commissioner Michael J. Copps’, in FCC (Federal Communications Commission), Report and Order and Further Notice of Proposed Rulemaking, FCC Docket No. 04-166.Google Scholar
Cramton, P. (2002), ‘Introduction to Chapter’, in Holmstrom, B., Milgrom, P., and Roth, A.. (eds), Game Theory in the Tradition of Bob Wilson, Bepress. Available: http://www.bepress.com/wilson/art25.Google Scholar
Cramton, P., Ingraham, A., and Singer, H. (2002), ‘The impact of incumbent bidding in set-aside auctions’, Criterion Working Paper, No. 02-07.Google Scholar
The Economist (1994), ‘Revenge of the Nerds’, 23 July: 70.CrossRefGoogle Scholar
FCC (Federal Communications Commission) (1993), Notice of Proposed Rulemaking, FCC Docket No. 93-455.Google Scholar
FCC (Federal Communications Commission) (1994), Fifth Report and Order, FCC Docket No. 94-178.Google Scholar
Galambos, L. and Abrahamson, E. (2002), Anytime, Anywhere, New York: Cambridge University Press.Google Scholar
Garey, M. and Johnson, D. (1979), Computers and Intractability, New York: W. H. Freeman.Google Scholar
Goeree, J. and Offerman, T. (2003), ‘Competitive bidding in auctions with private and common values’, The Economic Journal, 115 (489): 598–613.CrossRefGoogle Scholar
Guala, F. (2001), ‘Building economic machines’, Studies in the History and Philosophy of Science, 32 (3): 453–477.CrossRefGoogle Scholar
Harris, R. and Katz, M.. (1993a), ‘A public interest assessment of spectrum auctions for wireless telecommunications services’, Comments of NYNEX, FCC PP Docket No. 93-253.Google Scholar
Harris, R. and Katz, M. (1993b), ‘A public interest assessment of spectrum auctions for wireless telecommunications services’, Reply Comments of NYNEX, FCC PP Docket No. 93-253.Google Scholar
Hazlett, T. (2001), ‘The wireless craze, the unlimited bandwidth myth, the spectrum auction faux pas, and the punchline to Ronald Coase's “Big Joke”’, Harvard Journal of Law and Technology, 14 (2): 335–567.Google Scholar
Hazlett, T. and Muñoz, R. (2004), ‘What really matters in spectrum allocation design’, AEI-Brookings Joint Center for Regulatory Studies Working Paper 04-16.Google Scholar
Helm, L. (1994), ‘The cutting edge’, The New York Times, 19 October: D1.Google Scholar
Hundt, R. (2000), You Say You Want a Revolution, New Haven, CT: Yale University Press.Google Scholar
Irving, L. (1995), ‘Spectrum management: a balancing process’, IEEE Communications Magazine, 33 (12): 44–46.CrossRefGoogle Scholar
Isaac, R. M. (1993), ‘Discussion of proposed spectrum auction process’, Comments of CTIA, FCC PP Docket No. 93-253.Google Scholar
Jackson, M. (1999), ‘The non-existence of equilibrium in auctions with two dimensional types’, Caltech Division of Humanities and Social Sciences, 228–277.Google Scholar
Klemperer, P. (2004), Auctions: Theory and Practice, Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Kwerel, E. and Rosston, G. (2000), ‘An insiders' view of the FCC spectrum auctions’, Journal of Regulatory Economics, 17 (3): 253–289.CrossRefGoogle Scholar
Labaton, S. and Romero, S. (2001), ‘Wireless giants won FCC auction unfairly, critics say’, The New York Times, 12 February.Google Scholar
Ledyard, J., Plott, C., and Porter, D. (1994), ‘Experimental tests of auction software, supporting systems and organization’, FCC PP Docket No. 94-12.Google Scholar
Ledyard, J., Porter, D., and Rangel, A. (1997), ‘Experiments testing multiobject allocation mechanisms’, Journal of Economics and Management Strategy, 6 (3): 639–675.Google Scholar
Lee, K.-S. and Mirowski, P. (forthcoming), ‘A brief history of Vernon Smith's experimental economics, illuminated by the Mirowski–Hands thesis’, Cambridge Journal of Economics.Google Scholar
Maskin, E. (2004), ‘The unity of auction theory: Milgrom's masterclass’, Journal of Economic Literature, 42 (4): 1102–1115.CrossRefGoogle Scholar
McAfee, R. P. (1993a), ‘Auction design for personal communications services’, Comments of PacTel, FCC PP Docket No. 93-253.Google Scholar
McAfee, R. P. (1993b), ‘Auction design for personal communications services: reply comments’, PacTel Reply Comments, FCC PP Docket No. 93-253.Google Scholar
McAfee, R. P. and McMillan, J. (1996), ‘Analyzing the airwaves auction’, Journal of Economic Perspectives, 10 (1): 159–175.CrossRefGoogle Scholar
McCabe, K., Rassenti, S., and Smith, V. (1991), ‘Smart computer-assisted markets’, Science, 254 (5031): 534–538.CrossRefGoogle ScholarPubMed
McMillan, J. (1994), ‘Selling spectrum rights’, Journal of Economic Perspectives, 8 (3): 145–162.CrossRefGoogle Scholar
McMillan, J. (1995), ‘Why auction the spectrum?’, Telecommunications Policy, 19 (3): 191–199.CrossRefGoogle Scholar
McMillan, J. (2001), ‘Using markets to help solve public problems’, in Ito, T. and Krueger, A.. (eds), Governance, Regulation, and Privatization in the Asia-Pacific Region, Chicago: University of Chicago Pressss, pp. 73–89.Google Scholar
McMillan, J. (2002), Reinventing the Bazaar, New York: WW Norton.Google Scholar
McMillan, J. (2003), ‘Market design: the policy uses of theory’, AEA Papers and Proceedings, 93 (2): 139–144.Google Scholar
McMillan, J., Rothschild, M., and Wilson, R. (1997), ‘Introduction’, Journal of Economics and Management Strategy, 6 (3): 425–430.Google Scholar
Meister, A. (1999), ‘Evaluating the performance of the spectrum auctions’, Ph.D. Thesis, University of California, Irvine.Google Scholar
Mikoucheva, A. and Sonin, K. (2004), ‘Information revelation and efficiency in auctions’, Economics Letters, 83 (3): 277–284.CrossRefGoogle Scholar
Milgrom, P. (1995), ‘Auctioning the Radio Spectrum’, unpublished manuscript, retrieved 12 October 2006 from: http://www.market-design.com/files/milgrom-auctioning-the-radio-spectrum.pdf.Google Scholar
Milgrom, P. (2004), Putting Auction Theory to Work, New York: Cambridge University Press.CrossRefGoogle Scholar
Milgrom, P. and Wilson, R. (1993a), ‘Affidavit’, Comments of PacBell, FCC PP Docket No. 93-253.Google Scholar
Milgrom, P. and Wilson, R. (1993b), ‘Replies to Comments on PCS Auction Design’, Comments of PacBell, FCC PP Docket No. 93-253.Google Scholar
Mirowski, P. (2002), Machine Dreams, New York: Cambridge University Press.Google Scholar
Mirowski, P. and Nik-Khah, E. (2007), ‘Markets made flesh’, in MacKenzie, D., Muniesa, F., and Siu, L.. (eds), Do Economists Make Markets? On the Performativity of Economics, Princeton, NJ: Princeton University Press, pp. 190–224.Google Scholar
Mirowski, P. and Plehwe, D. (eds) (forthcoming), The Making of the Neoliberal Thought Collective, Cambridge, MA: Harvard University Press.Google Scholar
Murray, J. (2002), Wireless Nation, Cambridge, MA: Perseus.Google Scholar
Nalebuff, B. and Bulow, J. (1993a), ‘Designing the PCS auction’, Comments of Bell Atlantic, FCC PP Docket No. 93-253.Google Scholar
Nalebuff, B. and Bulow, J. (1993b), ‘Response to PCS auction design proposals’, Reply Comments of Bell Atlantic, FCC PP Docket No. 93-253.Google Scholar
Nik-Khah, E. (2005), ‘Designs on the mechanism’, Ph.D. Thesis, University of Notre Dame.Google Scholar
Noam, E. (1995), ‘Taking the next step beyond spectrum auctions’, unpublished manuscript retrieved February 18, 2005 from: http://www.columbia.edu/dc/wp/citi/citinoam21.html.Google Scholar
Parkin, M. (1998), Economics, 4th edn, Reading, MA: Addison-Wesley.Google Scholar
Plott, C. (1997), ‘Laboratory experimental testbeds: application to the PCS auction’, Journal of Economics and Management Strategy, 6 (3): 605–638.Google Scholar
Porter, D., Rassenti, S., Roopnarine, A., and Smith, V. (2003), ‘Combinatorial auction design’, Proceedings of the National Academy of Sciences, 100 (19): 11153–11157.CrossRefGoogle ScholarPubMed
Rizvi, S. A. T. (1994), ‘Game theory to the rescue?’, Contributions to Political Economy, 13 (0): 1–28.CrossRefGoogle Scholar
Roth, A. (2002a), ‘The economist as engineer’, Econometrica, 70 (4): 1341–1378.CrossRefGoogle Scholar
Roth, A. (2002b), ‘Preface to “The redesign of the matching market for American physicians”’, in Holmstrom, B., Milgrom, P., and Roth, A.. (eds), Game Theory in the Tradition of Bob Wilson, Bepress. Available: http://www.bepress.com/wilson/art15.Google Scholar
Skrzycki, C. (1993), ‘FCC prepares to carve up new portable phone frontier’, Washington Post, 16 September: D10.Google Scholar
Slaughter, S. and Rhoades, G. (2004), Academic Capitalism and the New Economy, Baltimore, MD: Johns Hopkins University Press.CrossRefGoogle Scholar
Thelen, J. (1995), ‘Milgrom's Progress’, The Recorder, 8 May.Google Scholar
USHR (United States House of Representatives) (1993), Report on Omnibus Budget Reconciliation Act of 1993, Committee on the Budget.Google Scholar
USC (United States Congress) (1993), Omnibus Budget Reconciliation Act of 1993.Google Scholar
Weber, R. (1993a), ‘Comments on FCC 93-455’, Comments of TDS, FCC PP Docket No. 93-253.Google Scholar
Weber, R. (1993b), ‘Reply to Comments on FCC 93-455’, Reply Comments of TDS, FCC PP Docket No. 93-253.Google Scholar
Weber, R. (1994), ‘Letter to John McMillan’, FCC PP Docket No. 93-253.Google Scholar
Weber, R. (1997), ‘Making more from less: strategic demand reduction in the FCC spectrum auctions’, Journal of Economics and Management Strategy, 6 (3): 529–548.Google Scholar