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The Biggest Auction Ever: The Sale of the British 3G Telecom Licences

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Author Info
Binmore, Kenneth
Klemperer, Paul

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Abstract

This paper reviews the part played by economists in organizing the British third-generation mobile-phone licence auction that concluded on 27 April 2000. It raised £22½ billion ($34 billion or 2½ % of GNP) and was widely described at the time as the biggest auction ever. We discuss the merits of auctions versus ‘beauty contests’, the aims of the auction, the problems we faced, the auction designs we considered, and the mistakes that were made.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3214.

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Date of creation: Feb 2002
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Handle: RePEc:cpr:ceprdp:3214

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Related research
Keywords: 3G; auctions; Bidding; mobile phones; spectrum auctions; telecommunications; UMTS;

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Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Klemperer, Paul, 2002. "How (Not) to Run Auctions: The European 3G Telecom Auctions," CEPR Discussion Papers 3215, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Jeremy Bulow & Paul Klemperer, 1994. "Auctions vs. Negotiations," NBER Working Papers 4608, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Cramton, Peter & Schwartz, Jesse A, 2000. "Collusive Bidding: Lessons from the FCC Spectrum Auctions," Journal of Regulatory Economics, Springer, vol. 17(3), pages 229-52, May. [Downloadable!] (restricted)
    Other versions:
  4. Klemperer, Paul, 2000. "What Really Matters in Auction Design," CEPR Discussion Papers 2581, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Martin Feldstein, 1999. "Tax Avoidance And The Deadweight Loss Of The Income Tax," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 674-680, November. [Downloadable!] (restricted)
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  6. Ballard, Charles L & Shoven, John B & Whalley, John, 1985. "General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States," American Economic Review, American Economic Association, vol. 75(1), pages 128-38, March. [Downloadable!] (restricted)
  7. Jeremy Bulow & Ming Huang & Paul Klemperer, 1999. "Toeholds and Takeovers," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 427-454, June. [Downloadable!] (restricted)
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  8. Abbink, Klaus & Irlenbusch, Bernd & Pezanis-Christou, Paul & Rockenbach, Bettina & Sadrieh, Abdolkarim & Selten, Reinhard, 2005. "An experimental test of design alternatives for the British 3G/UMTS auction," European Economic Review, Elsevier, vol. 49(2), pages 505-530, February. [Downloadable!] (restricted)
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  9. Jeremy Bulow & Paul Klemperer, 1999. "Prices and the Winner's Curse," Game Theory and Information 9904003, EconWPA. [Downloadable!]
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  10. Paul Milgrom, 2000. "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 245-272, April. [Downloadable!] (restricted)
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  11. Gilbert, Richard & Klemperer, Paul, 1993. "An Equilibrium Theory of Rationing," CEPR Discussion Papers 805, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April. [Downloadable!] (restricted)
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  13. Plott, Charles R. & Salmon, Timothy C., 2004. "The simultaneous, ascending auction: dynamics of price adjustment in experiments and in the UK3G spectrum auction," Journal of Economic Behavior & Organization, Elsevier, vol. 53(3), pages 353-383, March. [Downloadable!] (restricted)
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  14. McAfee, R Preston & McMillan, John, 1996. "Analyzing the Airwaves Auction," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 159-75, Winter. [Downloadable!] (restricted)
  15. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996. "How (Not) to Sell Nuclear Weapons," American Economic Review, American Economic Association, vol. 86(4), pages 814-29, September. [Downloadable!] (restricted)
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  16. Börgers, Tilman & Dustmann, Christian, 2001. "Strange Bids: Bidding Behaviour in the United Kingdom's Third Generation Spectrum Auction," CEPR Discussion Papers 3072, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  17. Marco Pagnozzi, 2003. "Sorry Winners," CSEF Working Papers 108, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
  18. Bulow, J. & Klemperer, P., 1999. "The Tobacco Deal," Economics Papers 1999-w11, Economics Group, Nuffield College, University of Oxford.
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  19. Philippe Jehiel & Benny Moldovanu, 1996. "Strategic Nonparticipation," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 84-98, Spring. [Downloadable!] (restricted)
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  20. John Cable & Andrew Henley & Kevin Holland, 2002. "Pot of gold or winner's curse? An event study of the auctions of 3G mobile telephone licences in the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 23(4), pages 447-462, December.
  21. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September. [Downloadable!] (restricted)
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  22. Sandro Brusco & Giuseppe Lopomo, 1999. "Collusion via Signalling in Open Ascending Auctions with Multiple Objects and Complementarities," Working Papers 99-05, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
  23. Peter Cramton & Jesse Schwartz, 2000. "Collusive Bidding in the FCC Spectrum Auctions," Econometric Society World Congress 2000 Contributed Papers 1210, Econometric Society. [Downloadable!]
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bernard Caillaud & Jacques Robert, 2003. "Implementing the Optimal Auction," CIRANO Working Papers 2003s-31, CIRANO. [Downloadable!]
  2. Simona Fabrizi & Bruno Wertlen, 2003. "Roaming in the Mobile Internet: when coverage sharing agreements call for regulation," DFAEII Working Papers 200309, University of the Basque Country - Department of Foundations of Economic Analysis II, revised 28 Jun 2006. [Downloadable!]
  3. Sander Onderstal & Pierre Koning, 2004. "Auctioning incentive contracts: application to welfare-to-work programs," CPB Discussion Papers 38, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  4. Ping Zhang, 2005. "Uniform Price Auction and Fixed Price Offerings in IPO: An Experimental Comparison," Discussion Papers 2005-20, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham. [Downloadable!]
  5. Marja Appelman & Joeri Gorter & Mark Lijesen & Sander Onderstal & Richard Venniker, . "Equal rules or equal opportunities? Demystifying level playing field," CPB Documents 34, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  6. Marco Pagnozzi, 2004. "Bidding to Lose? Auctions with Resale," CSEF Working Papers 116, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
  7. Sergei Izmalkov, 2004. "Multi-Unit Open Ascending Price Efficient Auction," Working Papers 2004.91, Fondazione Eni Enrico Mattei. [Downloadable!]
  8. Maarten C.W. Janssen & Vladimir A. Karamychev, 2005. "Auctions, Market Prices and the Risk Attitude Effect," Tinbergen Institute Discussion Papers 05-025/1, Tinbergen Institute. [Downloadable!]
  9. Maarten C.W. Janssen, 2003. "Auctions as Collusion Devices," Tinbergen Institute Discussion Papers 03-017/1, Tinbergen Institute. [Downloadable!]
  10. IKEDA Nobuo & Lixin YE, 2002. "Spectrum Buyouts:A Mechanism to Open Spectrum(revised December 2003)," Discussion papers 02002, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
  11. Ehrhart, Karl-Martin & Ott, Marion, 2003. "Auctions, Information, and New Technologies," Sonderforschungsbereich 504 Publications 04-05, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
  12. Klemperer, Paul, 2002. "How (Not) to Run Auctions: The European 3G Telecom Auctions," CEPR Discussion Papers 3215, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  13. C. Duke & L. Gangadharan, 2005. "Salinity in Water Markets: An ExperimentalInvestigation of the Sunraysia Salinity Levy, Victoria," Department of Economics - Working Papers Series 950, The University of Melbourne. [Downloadable!]
  14. Mark Thatcher, 2007. "Regulatory Agencies, the State and Markets: A Franco-British Comparison," RSCAS Working Papers 2007/17, European University Institute. [Downloadable!]
  15. Paul Klemperer, 2002. "Some Observations on the British and German 3G Telecom Auctions," Economics Papers 2002-W20, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
    Other versions:
  16. Burtraw, Dallas & Palmer, Karen, 2006. "Summary of the Workshop to Support Implementing the Minimum 25 Percent Public Benefit Allocation in the Regional Greenhouse Gas Initiative," Discussion Papers dp-06-45, Resources For the Future. [Downloadable!]
  17. Börgers, Tilman & Dustmann, Christian, 2001. "Strange Bids: Bidding Behaviour in the United Kingdom's Third Generation Spectrum Auction," CEPR Discussion Papers 3072, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  18. Flavio Menezes & John Quiggin, 2007. "Games without Rules," Theory and Decision, Springer, vol. 63(4), pages 315-347, December. [Downloadable!] (restricted)
  19. Young Han Lee & Ulrike Malmendier, 2007. "The Bidder's Curse," NBER Working Papers 13699, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  20. Emiel Maasland & Sander Onderstal, 2006. "Going, Going, Gone! A Swift Tour of Auction Theory and its Applications," De Economist, Springer, vol. 154(2), pages 197-249, June. [Downloadable!] (restricted)
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  21. Peter M. DeMarzo & Ilan Kremer & Andrzej Skrzypacz, 2004. "Bidding With Securities: Auctions and Security Design," NBER Working Papers 10891, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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