An event study of the first telecommunications spectrum auction in Korea and "the winner's curse"

The first telecommunications spectrum auction in Korea is attention worthy due to the fierce competition for only the 1.8 GHz spectrum band and the winning bidder was suspected of overpaying for acquiring the spectrum licence. This study empirically investigates the existence of winner's curse in the Korean spectrum auction by using standard event study methodology. The results showed that both the winner and the loser experienced significant positive return on the completion day of the auction. It implies that there is no winner's curse and the losing firm may actually increase its competitive advantage by acquiring the secondbest spectrum though failing to achieve its initial objective. Therefore, these results suggest that regulators may need to consider bringing positive short-term wealth benefits for all bidders by designing the spectrum auctopm appropriately such as performing multi-band auctions.