You are advising the UK PM how to allocate two bands of spectrum, 100MHz and 200MHz, to TVCoand MobileCo. Each band can be allocated to one or the other but not both. The valuation of spectrumbandbto companyiisvib. A company's valuations are its own private information. The PM thinks thevalue of each band to each company is distributed uniformly on[0,200]and the values are indepen-dent and identically distributed across bands and companies. The PM already owns the spectrumbands but does not value them.

(a) What is the efficient allocation of spectrum to the two companies?[2 marks]

(b) Find an incentive compatible and individually rational mechanism that allocates the bands ofspectrum efficiently. Discuss its interpretation.[4 marks]