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A stylized model of the German UMTS auction

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  • Moldovanu, Benny
  • Ewerhart, Christian

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.

Suggested Citation

  • Moldovanu, Benny & Ewerhart, Christian, 2002. "A stylized model of the German UMTS auction," Papers 02-07, Sonderforschungsbreich 504.
  • Handle: RePEc:mnh:spaper:2794
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    References listed on IDEAS

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    1. Richard Engelbrecht-Wiggans & Charles M. Kahn, 1998. "Multi-unit auctions with uniform prices," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 12(2), pages 227-258.
    2. van Damme, E.E.C., 2002. "The Dutch UMTS-auction," Other publications TiSEM e33a97f5-c69b-4c3b-9aca-4, Tilburg University, School of Economics and Management.
    3. Veronika Grimm & Frank Riedel & Elmar G. Wolfstetter, 2001. "The Third Generation (UMTS) Spectrum Auction in Germany," CESifo Working Paper Series 584, CESifo Group Munich.
    4. Philippe Jehiel & Benny Moldovanu, 1996. "Strategic Nonparticipation," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 84-98, Spring.
    5. Peter Cramton, 1997. "The FCC Spectrum Auctions: An Early Assessment," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 431-495, September.
    6. Tilman Börgers & Christian Dustmann, 2005. "Strange Bids: Bidding Behaviour in the United Kingdom's Third Generation Spectrum Auction," Economic Journal, Royal Economic Society, vol. 115(505), pages 551-578, July.
    7. 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.
    8. Noussair, Charles, 1995. "Equilibria in a Multi-object Uniform Price Sealed Bid Auction with Multi-unit Demands," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(2), pages 337-351, March.
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    Citations

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    Cited by:

    1. 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.
    2. Jacob Goeree & Theo Offerman & Randolph Sloof, 2013. "Demand reduction and preemptive bidding in multi-unit license auctions," Experimental Economics, Springer;Economic Science Association, vol. 16(1), pages 52-87, March.
    3. Moldovanu, Benny & Ewerhart II, Christian, 2001. "The German UMTS Design: Insights From Multi-Object Auction Theory," Sonderforschungsbereich 504 Publications 02-05, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    4. Gebhardt, Georg & Wambach, Achim, 2008. "Auctions to implement the efficient market structure," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 846-859, May.
    5. Paul Klemperer, 2002. "Some Observations on the British and German 3G Telecom Auctions," Economics Papers 2002-W20, Economics Group, Nuffield College, University of Oxford.

    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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