Offshore wind farms are capable of supplying large amounts of electricity but building one at a relatively low cost requires the right spot on the seabed. The Crown Estate held a sequential auction consisting of ‘bidding’ cycles, whereby bidders would nominate a site and offer a price per MW of offshore wind capacity.

Due to bidders defining the sites themselves, the auction creates an enormous number of states of the world that the bidder could find itself in, depending on the size, price and location of winning sites from earlier bidding cycles. We supported a bidder in this auction by developing a model of the process that calculated the bidding strategy that would maximise the bidders expected profit from the auction, under assumptions about rival bidders.

The model could not avoid the complexity of the auction or the uncertainty around other bidders’ behaviour, but with it we could draw out the key strategic mechanisms at play. Using the insights from the modelling exercise, we advised on how our client should prioritise its candidate sites, how aggressively to set its bid prices as a proportion of its valuations and the extent to which it could respond to information gleaned from initial bidding cycles.

The BCCI auction of Indian Premier League (IPL) broadcasting rights utilised a unique format featuring increasing price per match and sequential run-off auctions for pairs of rights packages. Bidders were challenged by uncertainties regarding the product, potential complementarities between packages, and limited information throughout the bidding process, all of which made it difficult to appropriately value the rights. The auction also attracted fierce competition from existing players and a new entrant.

We provided support to a bidder through all parts of the auction process. In the run up to the auction, our team helped engage with BCCI to resolve ambiguities, advised on bid strategy and developed a new mock auction software to familiarise the client with the distinct auction rules. We then provided on-site support to assist in the practicalities of implementing this bid strategy in real time.

For more on our work in this auction, click here.

How should one bid in a spectrum auction knowing that additional, substitutable, frequencies will be up for award in the not-too-distant future? This is a question faced by operators in Canada, where the telecoms regulator chose to split spectrum in the 3450 – 3900 MHz band (suitable for high capacity 5G services) across two sequential awards. The difficulty is to manage the trade-off between pushing to win more upfront to avoid falling behind competitors in the short term and holding back to try to pick up bandwidth at a lower price later on. On top of that was the need to navigate a lot structure that included 172 regions and a competitive environment that varied throughout the country.

DotEcon assisted a bidder in the first auction with finding the right approach. We prepared an auction playbook that set out the fundamentals of a suitable base strategy, but also ensured the bidder was able to react in real-time to events in the auction; this involved extensive training through a series of mock auctions, as well as real-time support during the auction and provision of tailored bid tracking software to assess developments and assist with decision making.

The practical support we offered allowed the bidder to strengthen its foothold in the band, gaining nationwide coverage whilst considering its position in the forthcoming auction.