Auctions and Regulation: Reengineering of Regulatory Mechanisms**

The FCC auctions, beginning in July 1994, were a watershed event in what may be best called reengineering regulation. It was the first time a new market mechanism, in the form of an auction, had been developed especially to replace traditional administrative procedures for regulating access to a natural resource. The spectrum auctions, and the soon to follow trading in SO2 emission rights were the two initial instances in which game theory, and more specifically auction theory, played an essential role in the design of an market-based allocation process. The FCC developed a novel auction format for the spectrum auctions. The replacing of administrative regulatory processes with market mechanisms is a major innovation in regulation, or perhaps more accurately, deregulation.

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