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Strange Bids: Bidding Behaviour in the United Kingdom's Third Generation Spectrum Auction

  • Tilman Börgers
  • Christian Dustmann

This article studies bidding behaviour in the auction of radio spectrum for third generation mobile telephone services which took place in the UK in the Spring of 2000. We show that several companies' bidding behaviour deviates strongly from straightforward bidding with private values. In particular some companies' evaluation of the added advantage of having a large licence rather than a small licence seemed to change dramatically during the auction. No compelling explanation of this phenomenon seems available at this stage. We conclude that it is less well understood than previously believed how spectrum auctions work. Copyright 2005 Royal Economic Society.

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 115 (2005)
Issue (Month): 505 (07)
Pages: 551-578

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Handle: RePEc:ecj:econjl:v:115:y:2005:i:505:p:551-578
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  1. Paul Klemperer & Ken Binmore, 2001. "The Biggest Auction Ever: the Sale of the British 3G Telecom Licences," Economics Series Working Papers 2002-W04, University of Oxford, Department of Economics.
  2. Jehiel, Philippe & Moldovanu, Benny, 2000. "License Auctions and Market Structure," CEPR Discussion Papers 2530, C.E.P.R. Discussion Papers.
  3. Emiel Maasland & Sander Onderstal, 2007. "Auctions with Financial Externalities," Economic Theory, Springer, vol. 32(3), pages 551-574, September.
  4. Veronika Grimm & Frank Riedel & Elmar G. Wolfstetter, 2001. "The Third Generation (UMTS) Spectrum Auction in Germany," CESifo Working Paper Series 584, CESifo Group Munich.
  5. Paul Milgrom, . "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Working Papers 98002, Stanford University, Department of Economics.
  6. Paul Klemperer, 1997. "Auctions with Almost Common Values: The Wallet Game and its Applications," Economics Series Working Papers 1998-W03, University of Oxford, Department of Economics.
  7. Lawrence M. Ausubel & Peter Cramton & R. Preston McAfee & John McMillan, 1997. "Synergies in Wireless Telephony: Evidence from the Broadband PCS Auctions," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 497-527, 09.
  8. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 267-343, Summer.
  9. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  10. John McMillan, 1994. "Selling Spectrum Rights," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 145-162, Summer.
  11. Demange, Gabrielle & Gale, David & Sotomayor, Marilda, 1986. "Multi-Item Auctions," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 863-72, August.
  12. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
  13. Klemperer, Paul, 2000. "What Really Matters in Auction Design," CEPR Discussion Papers 2581, C.E.P.R. Discussion Papers.
  14. 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.
  15. Peter Cramton, 1997. "The FCC Spectrum Auctions: An Early Assessment," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 431-495, 09.
  16. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401, June.
  17. Peter Cramton, 2002. "Spectrum Auctions," Papers of Peter Cramton 01hte, University of Maryland, Department of Economics - Peter Cramton, revised 16 Jul 2001.
  18. Peter Cramton & Jesse Schwartz, 2002. "Collusive Bidding in the FCC Spectrum Auctions," Papers of Peter Cramton 02collude, University of Maryland, Department of Economics - Peter Cramton, revised 04 Dec 2002.
  19. 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.
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