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Bids for the UMTS system: An empirical evaluation of the Italian case

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Author Info
Pasquale L. Scandizzo () (University of Rome, Tor Vergata, Italy)
Marco Ventura () (ISAE, Institute for Studies and Economic Analyses,Department of Law and Economics, Rome, Italy)

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Abstract

The aim of this paper is to analyze the licensing of the telecommunication spectrum as a public good and the search for equilibrium prices through bilateral bargaining and multilateral bidding. It develops a general model of price setting under dynamic uncertainty and applies it to the Italian auction for Universal Mobile Telecommunications System (UMTS). The empirical application shows that the model can be used both to determine the base price as well as other desirable characteristics to organize an auction and to better understand, after the auction is closed, what really happened in terms of the critical factors involved. After recalling some basic concepts on spectrum rights and reviewing the general experience with UMTS auctions in europe, the formal model and its application are presented. The results confirm certain views on the Italian auction, which are widely shared but were never tested before, namely that: (i) given the initial price, the number of licenses offered for the bidding should have been fewer, or alternatively, (ii) given the number of licenses, the base price should have been higher and (iii) the main bidder underpaid for the license. The model also allows us to quantify the bidders’ reservation price and the State and the bidders’ implicit bargaining powers.

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Publisher Info
Paper provided by Tor Vergata University, CEIS in its series CEIS Research Paper with number 88.

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Length: 10
Date of creation: 10 Dec 2006
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Handle: RePEc:rtv:ceisrp:88

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Postal: CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma
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Related research
Keywords: UMTS; Auction; Real Options; Licence.;

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This paper has been announced in the following NEP Reports: 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. van Damme, Eric, 2002. "The European UMTS-auctions," European Economic Review, Elsevier, vol. 46(4-5), pages 846-858, May. [Downloadable!] (restricted)
  2. Odin K. Knudsen & Pasquale L. Scandizzo, 2006. "Bringing Social Standards into Project Evaluation Under Dynamic Uncertainty," CEIS Research Paper 87, Tor Vergata University, CEIS.
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  3. Klemperer, P., 1999. "Auction Theory: a Guide to the Literature," Economics Papers 1999-w12, Economics Group, Nuffield College, University of Oxford.
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  4. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June. [Downloadable!] (restricted)
  5. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
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  6. Damme, E. van, 2002. "The European UMTS-auctions," Discussion Paper 100, Tilburg University, Center for Economic Research. [Downloadable!]
  7. Peter Cramton, 1998. "Ascending Auctions," Papers of Peter Cramton 98eer, University of Maryland, Department of Economics - Peter Cramton, revised 28 Jul 1998. [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. Pasquale L. Scandizzo & Marco Ventura, 2008. "A model of public and private partnership through concession contracts," ISAE Working Papers 104, ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY). [Downloadable!]
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