ContrAuction: An integrated contract and auction design for dynamic spectrum sharing

Designing mechanisms with proper economic incentives is essential for the success of dynamic spectrum sharing, and market-driven secondary spectrum trading is one effective way to achieve this goal. In this paper, we consider secondary spectrum trading between one seller (i.e., the primary spectrum owner, PO) and multiple buyers (i.e., the secondary users, SUs) in a hybrid spectrum market with both guaranteed contract buyers (future market) and spot purchasing buyers (spot market).We focus on the PO´s profit maximization with stochastic network information, and formulate the PO´s expected profit maximization problem, where the optimal solution serves as a policy guiding the allocation of every spectrum under every possible information realization. We study systematically the optimal solutions under both information symmetry and information asymmetry, depending on whether the PO can observe the SUs´ realized information. Under information symmetry, we show that the optimal solution (benchmark) maximizes both the PO´s expected profit (optimality) and the social welfare (efficiency). Under information asymmetry, an incentive-compatible mechanism is necessary for eliciting the SUs´ realized information. We propose the ContrAuction, an integrated contract and auction design, where the PO acts as virtual bidders (in addition to the role of an auctioneer) on behalf of the guaranteed contracts. We derive the optimal ContrAuction under the constraint of efficiency, and characterize the PO´s expected profit loss (compared to that under information symmetry) induced by the information rent for the SUs.