Can Market Forces and an Interference Limit Together Promote the Efficient Co-existence of Radio Systems

We examine the ability of market forces, augmented by an “interference limit,” to improve the efficiency with which radio systems co-exist. In a bargaining game with incomplete information, an interference limit can increase the likelihood that two radio system operators can come to a mutually beneficial agreement about both the level of interference that should exist between two radio systems and the price the benefiting party should pay to establish that level of interference. It can achieve this by changing the bargaining environment in a way that makes it more likely that an efficiency enhancing agreement can occur. By imposing a cost upon the system operator from using low quality receivers, it can also lead to the manufacture of higher quality receivers. An interference limit’s ability to improve the efficiency of the co-existence of two radio systems depends, in part, on whether the regulator has “good” information regarding the level of benefit and harm that operators experience from a given level of interference. The better this information, the greater the likelihood than an interference limit will improve efficiency. When the regulator doesn’t have good information about the harm that an interfered-with operator experiences from a given interference limit level, an interference limit can lead to a less efficient level of co-existence of radio systems.