“Ownership Concentration and Strategic Supply Reduction”by Professor Ulrich Doraszelski
University of Pennsylvania
We explore the sensitivity of the U.S. government’s ongoing incentive auction to multi-license ownership by broadcasters. We document significant broadcast TV license purchases by private equity firms prior to the auction and perform a prospective analysis of the effect of ownership concentration on auction outcomes. We find that multi-license holders are able to raise spectrum acquisition costs by 22% by strategically withholding some of their licenses to increase the price for their remaining licenses. A proposed remedy reduces the distortion in payouts to license holders by up to 80%, but lower participation could greatly increase payouts and exacerbate strategic effects.