Spectrum Auction And The Problem Of Winner's Curse: Arguing For A Consumer Centric Approach

Abstract

Spectrum auctions have long been surrounded in controversy. This is mostly due to the ineffective and unplanned policy of the government. After the formation of TRAI, in 2001, there was some uniformity in spectrum policy; however, with increasing political interference, it was rendered ineffective. The key challenge before the government is to design an auction that reduces the burden on the consumers while providing the government with maximum revenue. There are two main problems that the auction designers are facing today - collusion among the bidders and the problem of winner’s curse. While the government policy has increased transparency and reduced collusion, the problem of winner’s curse persists. This Article deals with the various methods of spectrum assignment. It then looks at the concept of auction design and analyses the various auction designs adopted by the government. Further, it looks into the problem of winner’s curse and the corollary problems faced by the telecom industry due to the increasing cost of spectrum. In conclusion, it is argued that the government must take active steps to avoid the problem of winner’s curse by amending the existing auction design so that the ultimate benefit is transferred to the consumers.