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

Author

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  • Rander, Robin

    (Department of Economics, Lund University)

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.

Suggested Citation

  • Rander, Robin, 2004. "The German 3G Licence Auction: Did the Government's Stake in Deutsche Telekom Influence the Outcome?," Working Papers 2004:15, Lund University, Department of Economics.
    • Handle: RePEc:hhs:lunewp:2004_015
    as

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    File URL: http://project.nek.lu.se/publications/workpap/Papers/WP04_15.pdf
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    References listed on IDEAS

    as
    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 514-526, June.
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    More about this item

    Keywords

    Auction theory; Telecommunications; Game theory; Toe hold;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • H82 - Public Economics - - Miscellaneous Issues - - - Governmental Property
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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