Option-based Dynamic Management of Wireless Spectrum

Dynamic spectrum management makes it possible for the owner of usage rights on some frequency blocks to sublet each of them in real time and for a limited period of time. As a softer implementation with respect to the spot market a two stage assignment is here proposed through the use of options, which give buyers the right to purchase the usage right on a single block and for a timeslot. In the sale of options the primary owner may accomplish an overbooking strategy, which consists in selling more blocks than the available ones and acts as hedging against the risk of unsold blocks. A model for the overbooking strategy is described and evaluated, which takes into account both the value of the option, the correlated decisions taken by the prospective purchasers, and the penalty to be paid to the unsatisfied customers. The dependence of the economical convenience of the overbooking strategy on the relevant parameters (among which the penalty value and the overbooking factor) is shown for a significant range of cases.