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

  • Pasquale L. Scandizzo

    ()

    (University of Rome, Tor Vergata, Italy)

  • Marco Ventura

    ()

    (ISAE, Institute for Studies and Economic Analyses,Department of Law and Economics, Rome, Italy)

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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Paper provided by Tor Vergata University, CEIS in its series CEIS Research Paper with number 88.

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Length: 10
Date of creation: 10 Dec 2006
Date of revision:
Handle: RePEc:rtv:ceisrp:88
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  1. van Damme, E.E.C., 2002. "The European UMTS-auctions," Other publications TiSEM 6194adbb-6fa3-4fc0-ae52-a, Tilburg University, School of Economics and Management.
  2. Odin K. Knudsen & Pasquale Lucio Scandizzo, 2004. "Bringing Social Standards into Project Evaluation Under Dynamic Uncertainity," CEIS Research Paper 63, Tor Vergata University, CEIS.
  3. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
  4. Peter Cramton, 1998. "Ascending Auctions," Papers of Peter Cramton 98eer, University of Maryland, Department of Economics - Peter Cramton, revised 28 Jul 1998.
  5. repec:dgr:kubcen:2002100 is not listed on IDEAS
  6. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Series Working Papers 2004-W09, University of Oxford, Department of Economics.
  7. Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Microeconomics 9903002, EconWPA.
  8. Valletti, Tommaso M., 0. "Spectrum trading," Telecommunications Policy, Elsevier, vol. 25(10-11), pages 655-670, October.
  9. repec:ner:tilbur:urn:nbn:nl:ui:12-89584 is not listed on IDEAS
  10. 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.
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