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The German 3G Licence Auction: Did the Government's Stake in Deutsche Telekom Influence the Outcome?

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  • Rander, Robin

    (Department of Economics, Lund University)

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    Abstract

    The spectrum for third generation (3G) mobile communications for the German market was alloted to operators by means of an auction. This resulted in a highly competitive outcome: six operators were given rights to provide 3G services. Government revenues from this auction were a staggering EUR 50.8 Bn. As the German government stands as majority shareholder in one of the strongest participants, Deutsche Telekom (DT), it was argued that DT had an incentive to push prices to higher levels than had otherwise been motivated, thereby servicing the interest of the majority shareholder. This paper provides a theoretical model which shows that the German auction rules were indeed vulnerable to such a conflict of interests. However, the only equilibrium of the model consistent with observed behaviour corresponds to a conflict of interest (in the context of the model) too small to have any impact on the behaviour of DT.

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    File URL: http://project.nek.lu.se/publications/workpap/Papers/WP04_15.pdf
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    Bibliographic Info

    Paper provided by Lund University, Department of Economics in its series Working Papers with number 2004:15.

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    Length: 27 pages
    Date of creation: 14 Apr 2004
    Date of revision:
    Handle: RePEc:hhs:lunewp:2004_015

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    Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
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    Keywords: Auction theory; Telecommunications; Game theory; Toe hold;

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    1. Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-26, June.
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