Most people will have some understanding and exposure to auctions – Ebay, real estate, and charity events all use auctions. Auctions are also a feature of many commercial arrangements, used to allocate things such as airport landing slots and bands of mobile phone spectrum. Tenders for services or goods provided are also a form of auction.
The rules of an auction can have a significant impact on how well they work – for example – bidders might have the opportunity to observe what other parties bid, but sometimes they are not allowed. The detailed rules affect the outcomes of an auction – how much money will be collected (or paid), how many bidders will take part and how they will bid, and the longer term functioning of the market.
Theory can provide us with insights to these questions and more. Auction theory has been an active area of research for the past thirty years and provides the basis through which many problems in today’s market based economy are considered, explored and addressed.
The CMD has worked with a number of partners in Government to develop settings that help to meet Government’s specific objectives.