Peter, "Are all golfers idiots?"

A soft-floor auction asks bidders to accept an opening price to participate in an ascending auction. If no bidder accepts, lower bids are considered using first-price rules. Soft floors are common despite being irrelevant with standard assumptions. When bidders regret losing, soft-floor auctions are more efficient and profitable than standard optimal auctions. Revenue increases as bidders are inclined to accept the opening price to compete in a regret-free ascending auction. Efficiency is improved since having a soft floor allows for a lower hard reserve price, reducing the frequency of no sale. Theory and experiment confirm these motivations from practice.The research paper is at https://cramton.umd.edu/auction/Bergemann, Dirk, Kevin Breuer, Peter Cramton, Jack Hirsch, Yero S. Ndiaye, and Axel Ockenfels, “Soft-Floor Auctions: Harnessing Regret to Improve Efficiency and Revenue,” University of Maryland Working Paper, April 2025.

On 7 April 2025, TheFutureEconomy.ca published Peter Cramton's "The Future of Mobile Broadband Can Arrive Early in Canada." Cramton envisions a future for Canada's mobile broadband through an "open access" model. It critiques the current regulatory landscape involving the CRTC and ISED, which the author argues creates complexities and hinders innovation. Cramton proposes a shift towards a market design where spectrum holders must sell a portion of capacity in an open-access wholesale market managed by an independent operator. He contends this would foster greater competition, lower rates, and increased investment, ultimately benefiting consumers, regulators, and mobile operators alike. Professor Cramton argues a market based on continuous auctions for capacity offers a simpler and more efficient alternative to traditional regulatory instruments. Implementing open access would create a more future-proof and competitive digital ecosystem for Canada. His research lab has built an open-source platform for trade, which is freely available.

This episode discusses a foundational paper by David Pearce and an applied paper on voting rules by Peter Cramton and his co-authors.Economists’ conceptions of utility and welfare reflect misguided attempts to mimic the physical sciences. The resulting tangle of ideas about meaninglessness, cardinality, and measurability forms a pyramid of misunderstandings that supports the wildly inappropriate standard interpretation of Arrow’s Impossibility Theorem. This paper is a quick primer on seeing past the myths. A natural reading of Arrow’s Theorem resolves the tension between abstract social choice theory and practical welfare analysis.No election rules are perfect, but they can be better. The Electoral College is increasingly failing to represent voter preferences in determining election winners. A path to reform begins with identifying election goals and establishing voting rules that best achieve these goals.The connection between the papers is discussed.

In this episode of the Spectrum Policy podcast, Martin Sims interviews Peter Cramton, an expert in spectrum auctions and economics. They discuss the proposal for a wholesale spectrum regulator in Thailand, exploring the evolution of spectrum auctions, the challenges faced by mobile communications, and the rise of satellite communications. Cramton emphasizes the need for competition in the Thai market and the potential benefits of a wholesale regulator to enhance market dynamics and consumer choice.TakeawaysPeter Cramton has been involved in spectrum auctions since 1982.Spectrum auctions have raised hundreds of billions for governments globally.The economics of mobile communications has struggled over the last decade.Satellite communications, like Starlink, are transforming the market.Regulatory processes can hinder competition and innovation.A wholesale spectrum regulator could benefit Thailand's market.Market dynamics can improve with the introduction of MVNOs.Trading technology used in electricity markets can be applied to communications.The proposal aims to create a competitive environment for consumers.Regulators should focus on protecting consumers rather than special interests.

Peter Cramton's response to a telecommunications journalist on February 12, 2025, outlines a market-based approach to achieving universal service in the global communications market. He critiques traditional methods, such as buildout obligations or administratively allocated subsidies, and advocates for competitive procurement auctions, a system proven effective in the U.S. under the FCC’s Rural Digital Opportunity Fund (RDOF). Cramton’s approach involves three key steps: (1) defining standard mobile and fixed broadband services (e.g., $50/month for mobile service with 10 Mbps speed and 15GB data), (2) identifying noneconomic areas where market forces fail to provide these services, and (3) conducting annual descending clock auctions to select the least-cost providers for three-year contracts. This ensures efficient resource allocation, reduces subsidies, and improves consumer services. Providers must meet service standards or face penalties and disqualification from future auctions.Cramton defends the proposed Thailand Independent Market Operator (TIMO) model as grounded in proven economic principles. He underscores the effectiveness of price mechanisms in guiding market behavior and critiques special interests that misrepresent policies to maintain inefficiencies. Supporting materials on auction design and open-access markets are available on his website.Supporting material is available on my webpage cramton.umd.edu/communications“A Study on Designing IMT Multiband Auction Formats for Thailand,” prepared for NBTC. [First Workshop YouTube, Slides, 17 December 2024]“An Open-Access Market for Global Communications” (with Erik Bohlin, Simon Brandkamp, Jason Dark, Darrell Hoy, Albert S. Kyle, David Malec, Axel Ockenfels, and Chris Wilkens) Telecommunications Policy, 48, 2024, https://doi.org/10.1016/j.telpol.2024.102820.[Presentation, Interactive Demo, Sample Code]“An open-access obligation is the best way to enhance competition following consolidation in mobile communications,” University of Maryland Working Paper, 2025.

Two papers propose innovative market designs to improve efficiency and transparency in financial and energy markets. One paper models electricity market dynamics using a regime-switching model to simulate realistic price distributions and explore hedging strategies. The other paper introduces "Flow Trading," a novel market design that allows for portfolio trading, continuous-scaled limit orders, and frequent batch auctions, demonstrating its computational feasibility and addressing several weaknesses of existing systems. A third source suggests a forward energy market that aligns participant incentives with social welfare, enhancing competition and resilience and potentially replacing capacity markets. These papers collectively explore how market design can improve resource allocation and risk management.Electricity requires a delicate balance of supply and demand every second. The system operator guides this behavior with the energy price—the reward for generators and the cost for wholesale consumers. The system operator optimizes the market participants' preferences to maximize as-bid social welfare subject to network and resource constraints. The problem is nontrivial as the startup of generating units introduces nonconvexities, and there are significant fluctuations in supply and demand due to weather, outages, and other factors. Price is the sole means to guide behavior to achieve the critical real-time balance. Despite the average energy price hovering around $25/MWh, the system's resilience depends on real-time prices fluctuating from -$100 to $9000/MWh—orders of magnitude more volatile than equities and bonds.Budish, Eric, Peter Cramton, Albert S. Kyle, Jeongmin Lee, and David Malec, “Flow Trading,” University of Maryland Working Paper, March 2023. Revise and resubmit at American Economic Review.Cramton, Peter, Simon Brandkamp, Hung-po Chao, Jason Dark, Darrell Hoy, Albert S. Kyle, David Malec, Axel Ockenfels, and Chris Wilkens, “A Forward Energy Market to Improve Reliability and Resiliency” University of Maryland Working Paper, February 2025.Simon Brandkamp, Cramton, Peter, Jason Dark, Darrell Hoy, David Malec, and Chris Wilkens, “Hedging electricity price spikes with forwards and options,” University of Maryland Working Paper, February 2025.

Over the past 20 years, it has become increasingly clear that the 61-mile San Clemente to San Diego segment of the coastal train is unsustainable. The region's coast is eroding at 6 inches annually. The train is a few feet from the bluff's edge in Del Mar and nearly in the surf in San Clemente. Twenty years of armoring at a cost approaching $1 billion have kept the train running most days, although outages are long and frequent. The Union-Tribune regularly reports on the coastal train and the efforts to relocate the rail away from the coast. Sadly, the stories echo the communications from SANDAG, which offer a steady spin on how essential the train is: "the only rail connection to the rest of the United States" or "the second-busiest rail corridor in the United States." As recently as Jan. 10, the paper reported on a federal grant intended to expand train service between Los Angeles and San Diego without a single comment on whether demand for this exists and what the true costs per user would be. Whether intended, this lack of critical perspective supports the myths about the train's value to the area. The articles, like SANDAG, never ask, "Does the train still make sense for the San Diego segment?" Opinion pieces have offered a more reasoned response to the issue. Trains cannot climb over mountains, so the solution requires tunnels in Del Mar and relocating the tracks in San Clemente, which, combined, may cost $20 billion over more than 10 years. This is despite the increasing evidence that existing heavy rail functions can be more economically accomplished in different ways, including light rail and electric vehicles — trucks, buses, cars, bikes and scooters — and information technology-supported transportation management via dedicated lanes along existing freeway corridors. Let's estimate the per-user subsidy to gauge the absurdity of the coastal train. The calculation is hampered by poor transparency in ridership. We focus on 2023, the most recent year for which we have data, and only on the projected costs to relocate the train, not the additional annual expenditures for operations and maintenance nor the opportunity cost of using the right-of-way for other purposes. Three passenger trains make use of the segment — Surfliner (San Clemente-San Diego), Metrolink (San Clemente-Oceanside) and Coaster (Oceanside-San Diego). We wish to calculate the annual per-user subsidy of a commuter taking the train to and from work five days per week for 48 weeks of the year. The round trips from all trains in 2023 were 576,884, and the annual amortization of $20 billion over 30 years with a 4 percent discount rate is $1,157 million, yielding a yearly subsidy per commuter of $481,137. Such a subsidy is indefensible.

This photo is from Webb House at Wellesley College in 1946. The five freshmen are Harriet Cramton, wife of Roger Cramton, Mollie Kramer Hughes, wife of 'Turk' Hughes, Nicole De Messiere, Joanna Rogers Macy, and Mitzi Shfrin. Mollie's music brought us together. She is playing a guitar in the photo. Forever friends, Nicole and Joanna, were high honor students. "Jo" was head of the Chapel and dismayed the Bible department. When she turned to Buddhism (an excellent choice), where she was a renowned scholar giving workshops the world over. She hiked into and out of Tibet on her own. Has visited with the Dali Loma. With the Peace Corps in India, she and her husband Fran helped establish a community for the Tibetans fleeing from the Chinese.I remember going to her Buddhist temple in Washington, DC, and enjoying it very much, except there was too much incense. Then, a few years later, I went skiing with her son at a resort in New Hampshire. We arrive to three inches of freezing rain on December 31st. No worries, we were staying with a Russian friend of Jo's who had a cabin in the woods with an outdoor sauna. We started drinking vodka at 4pm and had the best New Year's Eve party ever. We danced all night. We took nude sauna baths and slid on the ice naked. What a way to bring in the New Year. The next day, we slept.

Peter Cramton contends that the forward energy market, as presented in Cramton, Peter; Brandkamp, Simon; Chao, Hung-po; Dark, Jason; Hoy, Darrell; Kyle, Albert S. et al. (2025): A Forward Energy Market to Improve Reliability and Resiliency, is a sound proposal to improve competition and innovation in today's restructured electricity markets. https://cramton.umd.edu/electricity/. He believes it is an excellent approach to achieving resource adequacy and improving resiliency in response to the challenges of the energy transition.He will pay $1000 to the first person who identifies a significant weakness in the forward energy market approach, assuming 1) the market participants attempt to make decisions to maximize their happiness and are often successful, 2) the system operators attempt to conduct transparent and efficient markets consistent with their mission and are somewhat success, and 3) the regulators seek to adopt regulatory rules that benefit the public by promoting competitive and efficient electricity markets and are occasionally successful.Please post your ideas in the comments section of this post. He will review them and send a check for $1000 to the first person who finds a significant flaw. Peter will ask a noted electricity market design expert to determine when a significant weakness is identified. He is certain there is a weakness but needs some help finding it. Many thanks to those who try.

This is a fun take on the distribution of intelligence across professions.