AØKA08229U Auctions: Theory and Practice

Auctions are used for a wide variety of economic transactions. They are used to allocate pollution permits, to sell concert tickets, and to put a price tag on consumer goods such as electricity and pharmaceuticals. Auctions represent a pure form of market interaction, which means that the insights drawn from this field are readily applicable to more general economic concepts. In this course, we will take a closer look at auction theory and its practical applications.

We will first cover standard auction theory related to single-unit auctions, such as various simple auction formats, concepts such as the winner’s curse, the revenue equivalence theorem, etc.

We will then move on to more complex topics, such as multi-unit and multi-object auction formats and the specific complications associated with allocating multiple goods (e.g. substitutability/complementarity, exposure risk, switching rules) as well as specific issues related to repeated auctions.

In the final part of the course, we will investigate how to design auctions subject to certain policy objectives. In particular, we will focus on auctions and tenders with objectives related to competition economics, such as the support of market entry, the avoidance of foreclosure or collusion, the facilitation of “fair” outcomes, etc. Specific auction design features covered during the course will include concepts such as activity rules, information rules, bid signalling, caps and floors.

Throughout the course, we will place considerable emphasis on incorporating specific cases, i.e. applications of auction theory in practice, in order to demonstrate theoretical concepts. These cases will cover auctions and tenders from a variety of fields and industries, including telecommunications, pharmaceuticals, electricity, IP addresses, agriculture, etc.”