Low Price Equilibrium in Multi–Unit Auctions: The GSM Spectrum Auction in Germany1

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 multi–unit auction. The present paper gives an account of the events, describes the auction rules and market conditions, and provides a game theoretic explanation of low price equilibrium in simultaneous, ascending–bid multi–unit auctions. In particular, it is shown that in the unique equilibrium that survives iterated elimination of dominated strategies, the efficient allocation is reached at the minimum bid.