The German 4G Spectrum Auction: Design and Behavior

The 2010 German 4G spectrum auction was an unusually large simultaneous ascending multi-band auction. The bidding was competitive, the final assignment was efficient and the revenue was close to expectations. However, our analysis suggests that, theoretically, independent and rational bidders had an opportunity to implicitly coordinate on a low-revenue outcome. Yet, the same analysis suggests that a multiplicity of focal points, including an outcome that involves post-auction negotiations, complicated implicit coordination and posed risks to bidders and the auctioneer. We analyze different bidding scenarios and in particular how postauction negotiations can affect values, bidding and efficiency. We also briefly discuss how the simultaneous ascending auction format can be augmented to mitigate the risks implied by the possibility of strategic play. (JEL D44, D47, C78, L96.