Webinar #3

Auctions for RES: what can we learn from other industries?

Marie-Christin Haufe Takon GmbH

Overview  Characterization of auction applications  Examples for auctions in other industries

 Industrial procurement auctions  Sales auctions for telecommunication licenses  Auctions for refinancing operations  Auctions for gas and oil leases  Lessons learnt for AURES

HOW TO CHARACTERIZE AUCTION APPLICATIONS?

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How do auctions operate? Auctions are reasonable in competitive situations, where the value of the good is uncertain.

Goals

Auction format

Profit Efficiency

Static or dynamic auction

Market conditions

…

Pricing rule

Who?

Good specification

…

…

Good specification  Good specification What is auctioned?

one good

multiple goods homogeneous

substitutive complementary

 Relevant parameters for valuation of the good    

Price Quality Uncertainties …

heterogeneous

substitutive

complementary

Market conditions  Who participates in the auction?     

How many? How well do they know each other? (market transparency) Experienced or unexperienced bidders Symmetric or asymmetric bidders Risk attitude of bidders

 For what purpose do they participate in the auction? (bidder’s perspective)    

Profit maximization “Buy at low prices / sell at high prices” Interest in one or multiple goods? Further interests, e.g. blocking competitors? Are there interdependencies between several awards? (economies of scale / capacity constraints) Incentives for collusion

 What information regarding the good do the participants have?  Information asymmetries  Uncertainties

 What do the participants know / believe about each other?

Goals  Expected auction revenue (profit maximization)  Effectiveness  Efficiency  Further goals     

Public acceptance of the auction Security / Reliability High / diverse participation Mitigate collusion …

“Now we know where we are and where to go, but not the way!”

Auction formats  Bidders behave differently in different auction formats!  The same auction format conducted under different market conditions may lead to completely different outcomes  Different auction formats conducted under the same market conditions may lead to completely different outcomes

 Ambiguity regarding the ranking of various auction formats  A suitable auction mechanism adequately incorporates given market conditions on the one side and triggers incentives that lead to the predetermined goals on the other side.

However:

“The optimal way is a balancing act!”

INDUSTRIAL PROCUREMENT AUCTIONS

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Industrial procurement auctions

Good A

Supplier

Good B

Good A and B

Price

Quality

Score

Price

Quality

Score

Price

Score

1

100

1

100

55

1

55

155

155

2

120

0,8

96

40

0,8

32

160

128

3

140

0,7

98

30

0,9

27

170

125

Industrial procurement auctions Example 2: Bundling and Splitting

 

Company XY plans to procure two goods A and B. The award is based on  

 

procurement costs delivered quality 0