Identifying the Winner's Curse in the First Spectrum Auction in the Republic of Korea Using an Event Study Approach

The first spectrum auction in the Republic of Korea is attention‐worthy owing to the fierce competition for the only 1.8‐GHz spectrum license, the winning bidder of which was suspected of overpaying for its acquisition. This study empirically investigates the existence of a “winner's curse” in the first Korean spectrum auction by using a standard event study methodology. The results show that both the winner and loser experienced significant positive returns on the completion day of the auction. The results imply that there was no winner's curse in the auction and that the losing firm might increase its competitive advantage by acquiring other spectrum licenses despite failing to achieve its initial target spectrum. Therefore, these results suggest that regulators may need to consider bringing about positive short‐term wealth benefits to all bidders by appropriately designing a spectrum auction, such as by performing multiband auctions.