Roberto Muñoz

A welfare analysis of spectrum allocation policies

Economic analysis of spectrum policy focuses on government revenues derived via competitive bidding for licenses. Auctions generating high bids are identified as successful and those with lower receipts as fiascoes. Yet spectrum policies that create rents impose social costs. Most obviously, rules favoring monopoly predictably increase license values but reduce welfare. This article attempts to shift analytical focus to efficiency in output markets. In performance metrics derived by comparing 28 mobile telephone markets, countries allocating greater bandwidth to licensed operators and achieving more competitive market structures are estimated to realize efficiencies that generally dominate those associated with license sales. Policies intended to increase auction receipts (e.g., reserve prices and subsidies for weak bidders) should be evaluated in this light. Copyright (c) 2009, RAND..

Spectrum Allocation in Latin America: An Economic Analysis

Like elsewhere in the developing world, wireless markets now play a crucial role in Latin American economic growth. Mobile telephone networks increasingly provide the communications infrastructure that has largely been lacking throughout the region. Yet, governments have generally made only modest allocations of bandwidth available to Latin American wireless operators, either absolutely (in terms of spectrum each country could allocate) or relative to other countries in Asia or the European Union. Using an empirical model estimated on mobile phone data for 40 international markets, we show that very large social gains are available to countries that succeed in permitting more liberal use of radio spectrum. Two of the most striking examples of this approach are Guatemala and El Salvador, each of which utilizes about 50% more bandwidth for mobile telephony than the Latin American mean. We conduct simulations, using our calibrated model, to project country-by-country gains from expanding access to radio spectrum. Substantial efficiency increases are possible, which dominate gains associated with extracting public funds via auctions, the area of focus in the economic literature.

Social connections and access charges in networks

In this paper we present a model where two interconnected network operators compete in linear prices in a market characterized by the existence of social connections among consumers, which are represented by a random regular graph. Assuming horizontal differentiation among operators, the customers select their network provider based on their preferences and the prices offered by the competing firms. In equilibrium the number of calls made to other agents depends on where they are located in the social network.

Network Structure in a Link-formation Game: An Experimental Study

Network formation is frequently modeled using link-formation games and typically present a multiplicity of Nash equilibria. Cooperative refinements - such as strong or coalitional proof Nash equilibria - have been the standard tool used for equilibrium selection in these games. Non-cooperative refinements derived from the theory of global games have shown also that, for a class of payoff functions, multiplicity of equilibria disappears when the game is perturbed by introducing small amounts of incomplete information. We conducted a laboratory study evaluating the predictive power of each of these refinements in an illustrative link-formation game. Compared with cooperative game solutions, the global game approach did significantly better at predicting the strategies played by individuals in the experiment.