Efficiency-Revenue Optimality Tradeoffs in Dynamic Spectrum Allocation

This paper proposes an auction mechanism for dynamic spectrum allocation that balances between two conflicting objectives: revenue and efficiency. The spectrum resources are allocated by FCC (i.e., the auctioneer) with the objective of maximizing revenue while also increasing efficiency or social welfare. Unfortunately, revenue and efficiency are often not aligned with one another. Truthful mechanisms, such as Vickrey-Clarke-Groves (VCG), are shown to be efficient in terms of social welfare, but poor in terms of revenue generation. On the other hand, mechanisms, such as uniform-price, can generate higher revenues than VCG, but less efficient. We show that the incorporation of adequate reservation price to the uniform-price auction mechanism gives enough incentives to spectrum buyers to be truthful, thus providing a good balance between efficiency and revenue. We investigate the impact of reservation price not only on the revenue and efficiency, but also on the spectrum utilization. Simulation results show that the proposed auction mechanism maximizes revenue while also increasing efficiency and spectrum utilization.