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Low price equilibrium in multi-unit auctions: The GSM spectrum auction in Germany

Author

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  • Grimm, Veronika
  • Riedel, Frank
  • Wolfstetter, Elmar

Abstract

The second-generation GSM spectrum auction in Germany is probably the most clear cut example of a low price outcome in a simultaneous ascending-bid auction. The present paper gives an account of the events, describes the auction rules and market conditions, and provides a theoretical explanation of low price equilibria in simultaneous, ascending-bid auctions. In particular it is shown that the low price equilibrium that implements the efficient allocation is the unique perfect equilibrium of that game.

Suggested Citation

  • Grimm, Veronika & Riedel, Frank & Wolfstetter, Elmar, 2001. "Low price equilibrium in multi-unit auctions: The GSM spectrum auction in Germany," SFB 373 Discussion Papers 2001,31, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    • Handle: RePEc:zbw:sfb373:200131
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    References listed on IDEAS

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    1. Ulrich Kamecke, 1998. "Dominance or maximin: How to solve an English auction," International Journal of Game Theory, Springer;Game Theory Society, vol. 27(3), pages 407-426.
    2. Paul Klemperer, 2002. "What Really Matters in Auction Design," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 169-189, Winter.
    3. Chatterjee, Kalyan & Samuelson, Larry, 1990. "Perfect Equilibria in Simultaneous-Offers Bargaining," International Journal of Game Theory, Springer;Game Theory Society, vol. 19(3), pages 237-267.
    4. Veronika Grimm & Frank Riedel & Elmar G. Wolfstetter, 2001. "The Third Generation (UMTS) Spectrum Auction in Germany," CESifo Working Paper Series 584, CESifo.
    5. Richard Engelbrecht-Wiggans & Charles M. Kahn, 2005. "Low-Revenue Equilibria in Simultaneous Ascending-Bid Auctions," Management Science, INFORMS, vol. 51(3), pages 508-518, March.
    6. Cramton Peter & Schwartz Jesse A, 2002. "Collusive Bidding in the FCC Spectrum Auctions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 1(1), pages 1-20, December.
    7. Cramton, Peter & Schwartz, Jesse A, 2000. "Collusive Bidding: Lessons from the FCC Spectrum Auctions," Journal of Regulatory Economics, Springer, vol. 17(3), pages 229-252, May.
    8. Christopher Avery, 1998. "Strategic Jump Bidding in English Auctions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(2), pages 185-210.
    9. Menezes, Flavio M., 1996. "Multiple-unit English auctions," European Journal of Political Economy, Elsevier, vol. 12(4), pages 671-684, December.
    10. van Damme, Eric, 2002. "The European UMTS-auctions," European Economic Review, Elsevier, vol. 46(4-5), pages 846-858, May.
    11. Cramton, Peter, 1998. "Ascending auctions," European Economic Review, Elsevier, vol. 42(3-5), pages 745-756, May.
    12. Sandro Brusco & Giuseppe Lopomo, 2002. "Collusion via Signalling in Simultaneous Ascending Bid Auctions with Heterogeneous Objects, with and without Complementarities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(2), pages 407-436.
    13. Paul Milgrom, 2000. "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 245-272, April.
    14. Robert J. Weber, 1997. "Making More from Less: Strategic Demand Reduction in the FCC Spectrum Auctions," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 529-548, September.
    15. Robert Wilson, 1979. "Auctions of Shares," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(4), pages 675-689.
    16. R. Preston McAfee & John McMillan, 1996. "Analyzing the Airwaves Auction," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 159-175, Winter.
    17. Paul Klemperer, 2002. "What Really Matters in Auction Design," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 169-189, Winter.
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    More about this item

    Keywords

    multi-unit auctions; spectrum auctions; telecommunications; industrial organization; game theory;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing

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