Data Mapping

As global investments become more decentralized, a growing number of assets are being auctioned off to the highest bidder, rather than relying upon traditional sales mechanisms. For governments and private corporations alike, auction mechanism design has become an increasingly important question. In particular, sellers of assets, ranging from intellectual property rights to physical land, are aiming to design auctions to maximize revenue – the type of auction chosen depends upon the nature of the good (for example, wireless spectrum rights are, often, non-exclusive) as well as the allocation of the rights (leased-temporary or permanent-fixed.) Analysts have actively worked to better understand auction data in order to determine the best strategy for both sales and bidding purposes. In order to better evaluate the underlying auction data, economists have formulated several classes of auction models:

Game Theory Models
Utilized to understand and model strategic auction behavior, each bidder has an unspecified demand function for the item in question. Certain models, which are based on private valuations, relate to instances where there is private information (such as private estimates on intellectual property), while other models are based upon public information (for example, when companies are bidding on rights to a revenue stream.) In particular, the marginal bidding decision is based upon the expected private bidder surplus, which is the difference between the valuation and the bid price. Often times, bidders end up overpaying for an item based upon the winner’s curse, a condition where competitive bidding leads to suboptimal outcomes in the context of competition.

Generalized Second-Price Auctions
A type of sealed-bid auctions, Vickrey auctions define a broad class of auctions where the winner pays the second-highest price for the good. Most commonly, this structure is used in Internet auctions where the winner bidder pays the second highest bid plus a marginal amount over that bid, as determined through proxy bids. Another form of generalized 2nd price auction were the FCC’s wireless spectrum auctions to allocate spectrum to telecommunications companies for cellular and data communications.

Ascending, English Auctions
The “traditional” auction format is based upon an opening suggested bid, followed by visible bids, which gradually increase the price until the winning bidder is solidified. These auctions are common in the art and collectibles world, although variants have emerged to allow for proxy bids by global bidders. In order to estimate and forecast English Auction outcomes, analysts must create an estimated value for the item, as many collectible auction houses do.