Auction design

We are leaders in the design and implementation of high-stakes auctions.



DotEcon provides a one-stop shop for all aspects of designing and running auctions.

We are at the forefront of running spectrum auctions around the globe.

We are involved in redesigning energy markets.

We have pioneered the use of auctions for new applications, including to natural resource allocation and the environment.

Auctions are everywhere: selling advertising space on web pages; allocating radio spectrum to power your mobile phone; deciding which electricity plants generate; monetising sports rights and getting value for money in public procurement. Licensing auctions can set the structure of an industry for years to come.

Auctions can range from the very simple to the highly complex. There is no single set of rules that works for all cases. Successful auctions are designed to their particular circumstances. Well-designed auctions embed the organiser's objectives, trade-offs and constraints. They should give bidders clear incentives to behave straightforwardly without needing complex strategising to second guess opponents. Bidders and auctioneers should not be exposed to the risk of regret about the eventual outcome.

Building and running successful auctions takes a mix of skills: game theory to understand how the auction design affects incentives; experimental techniques for robust dry-run testing; algorithm design and flexible auction software to deliver the designer's objectives. 

Our team has all these skills, together with an exceptional track record in delivering high-value auctions and developing innovative uses for auctions.

Applications of auctions

Resource allocation

Governments routinely use auctions to allocate resources as diverse as radio spectrum, licences to use natural resources, oil fields, government bonds and carbon emission rights.

Procurement auctions

Both governments and B2B buyers are streamlining supply chains and saving money with procurement auctions.

Enforced Divestments

Regulators use auctions for enforced divestments following mergers to prevent sweetheart deals.

New applications

Auctions are continuously finding new applications. For example, new ideas about bidding processes are influencing competition enforcement and merger control.

Going for cover

Regulators are increasingly looking for ways to improve broadband coverage in areas that are underserved. The challenge is to get operators to deploy networks in locations that are not commercially viable in a way that is sustainable and with the minimum level of financial support. Using spectrum auctions and making prospective users pay for spectrum through improved coverage rather than fees is one approach.

A good example is the 2022 Austrian multiband auction where we recommended the inclusion of a reverse auction stage in which bidders could offer to serve geographic areas with limited (or no) existing coverage in exchange for a discount on their spectrum fees. A single round sealed bid process allowed the auctioneer to select the outcome that provided the most additional coverage for a given budget whilst mitigating the risk of gaming.

The award led to additional coverage in more than two thirds of the under-served areas that were available to bid for, almost certainly making Austria better connected than it would be otherwise.

For more see here.

Gone fishing

Fish farming is a significant industry in Norway with huge commercial value. However large concentrations of waste produced from aquaculture sites can be detrimental to the ecosystem and wild fish populations, requiring a fine balance between sustainable growth in the industry and overproduction to the point of destruction. Therefore, the regulator controls the number of permits that are available for this activity. New regional permits are auctioned periodically and we have assisted with the design and implement of such auctions.

The best format for this type of allocation problem is a clock auction in which participants bid for a specific tonnage in each region at a price per tonne announced by the auctioneer. Prices increase until demand is reduced to match supply. However, synergies mean that bidders may require a certain minimum capacity within a region or across adjacent regions to be commercially viable. The auction rules address these concerns by allowing bidders to make so-called ‘exit bids’ indicating their demand at intermediate prices and including an option to specify a minimum capacity for each region.

Managing these exit bids and minimum requirements is straightforward with DotEcon's WebBidder™ system, which has features that help bidders identify the relevant constraints on such bids in terms of quantities and prices. See our auction implementation page for a demo of this particular auction software.

5G frequencies in Ireland

We were asked to design and implement an award of a total of 470 MHz of radio spectrum in multiple bands, including low and high frequency bands crucial for the roll-out of 5G services. In addition to promoting an efficient assignment of spectrum, the award design also needed to protect against potential anticompetitive outcomes and allow non-MNO participants to compete on a level playing field.

We recommended the use of a Combinatorial Clock Auction (CCA) with relaxed activity rules. We introduced a new feature, the exposure price, that informed bidders about the likely discounts on the clock prices they could expect given the constraints on other bidders. The auction was run using customised WebBidder software and completed successfully, with spectrum awarded to both MNOs and a non-MNO participant.

For ComReg's landing page on this auction, including various reports by DotEcon, click here.