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A Stylized Model of the German UMTS Auction

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  • Moldovanu, Benny

    ()
    (Department of Economics, University of Mannheim, Germany)

  • Ewerhart II, Christian

    ()
    (Sonderforschungsbereich 504)

Abstract

This paper discusses some economic aspects of the recent German and Austrian UMTS license auctions. We consider a stylized model of the open ascending auction with incomplete information and market externalities. It is shown that, if the dominant incumbent is not successful in pushing the weakest entrant out of the market, he will face ex-post spurious price increments. We argue that this feature of the German auction design caused a significant risk for the bidding firms. In particular, being aware of these risks, an incumbent may be willing to accommodate the entrant earlier than what one would expect from the valuations alone. We compare our predictions with the observed outcomes.

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Bibliographic Info

Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 02-07.

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Length: 27 pages
Date of creation: 11 Jan 2002
Date of revision:
Handle: RePEc:xrs:sfbmaa:02-07

Note: The authors are grateful to Tilman Börgers, Holger Müller and seminar participants in Gerzensee for useful comments. We also thank Mathias Meisel, portfolio manager at Zurich Invest, for insightful discussions about the telecommunications industry. Financial support by the Sonderforschungsbereich 504 is gratefully acknowledged.
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  1. Eric van Damme, 2002. "The Dutch UMTS-Auction," CESifo Working Paper Series 722, CESifo Group Munich.
  2. Richard Engelbrecht-Wiggans & Charles M. Kahn, 1998. "Multi-unit auctions with uniform prices," Economic Theory, Springer, vol. 12(2), pages 227-258.
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Cited by:
  1. Christian Ewerhart & Benny Moldovanu, 2002. "The German UMTS Design: Insights From Multi-Object Auction Theory," CESifo Working Paper Series 680, CESifo Group Munich.
  2. Peter Cramton & Andrzej Skrzypacz & Robert Wilson, 2007. "Revenues in the 700 MHz Spectrum Auction," Papers of Peter Cramton 07rev700, University of Maryland, Department of Economics - Peter Cramton, revised 2007.
  3. Klemperer, Paul, 2002. "Some Observations on the British and German 3G Telecom Auctions," CEPR Discussion Papers 3605, C.E.P.R. Discussion Papers.
  4. Jacob Goeree & Theo Offerman & Randolph Sloof, 2013. "Demand reduction and preemptive bidding in multi-unit license auctions," Experimental Economics, Springer, vol. 16(1), pages 52-87, March.

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