Economics

Increasing Turnover

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Science  19 Feb 2010:
Vol. 327, Issue 5968, pp. 923
DOI: 10.1126/science.327.5968.923-b
CREDIT: ISTOCKPHOTO.COM

Used car salesmen and yard sale bargain hunters depend on secondary markets, in which the seller of a good is not the first to have sold the good. These markets are crucial for the efficient reallocation of resources to meet changing demands. Yet regulations on the use and trade of some goods can influence the efficiency with which a secondary market functions. Such is the case with the U.S. wireless spectrum market. Much has been written about the Federal Communications Commission's (FCC's) use of auctions to make initial allocations of bandwidth; less is known about how licenses are later bought and sold. Mayo and Wallsten analyzed FCC records on license transfer since 1994 to assess how regulatory control and approval processes influenced the emergence and function of a secondary spectrum market. Their findings suggest that steps taken by the FCC in the early 2000s to improve secondary markets have had a positive impact. The volume of trading has become comparable to the volume of initial allocations. Also, the average time needed to approve trades has diminished from 150 days for a personal communications service license in 1998 to less than 50 days in 2005.

Inf. Econ. Policy 22, 10.1016/j.infoecopol.2009.12.005 (2010).

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