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

  • Scandizzo, Pasquale L.
  • Ventura, Marco

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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Article provided by Elsevier in its journal Telecommunications Policy.

Volume (Year): 30 ()
Issue (Month): 10-11 (November)
Pages: 533-551

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Handle: RePEc:eee:telpol:v:30:y::i:10-11:p:533-551
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  1. Paul Klemperer, 2004. "Auctions: Theory and Practice," Online economics textbooks, SUNY-Oswego, Department of Economics, number auction1, September.
  2. Klemperer, Paul, 1999. "Auction Theory: a Guide to the Literature," CEPR Discussion Papers 2163, C.E.P.R. Discussion Papers.
  3. van Damme, Eric, 2002. "The European UMTS-auctions," European Economic Review, Elsevier, vol. 46(4-5), pages 846-858, May.
  4. Cramton, Peter, 1998. "Ascending auctions," European Economic Review, Elsevier, vol. 42(3-5), pages 745-756, May.
  5. Odin K. Knudsen & Pasquale L. Scandizzo, 2006. "Bringing Social Standards into Project Evaluation Under Dynamic Uncertainty," CEIS Research Paper 87, Tor Vergata University, CEIS.
  6. repec:ner:tilbur:urn:nbn:nl:ui:12-89584 is not listed on IDEAS
  7. Valletti, Tommaso M., 0. "Spectrum trading," Telecommunications Policy, Elsevier, vol. 25(10-11), pages 655-670, October.
  8. Andrea Prat & Tommaso M. Valletti, 2001. "Spectrum Auctious Versus Beauty Contests: Costs and Benefits," Rivista di Politica Economica, SIPI Spa, vol. 91(4), pages 65-114, April-May.
  9. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
  10. repec:dgr:kubcen:2002100 is not listed on IDEAS
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