How does auction theory determine the future of the economy?
Auctions are gradually becoming an increasingly important component of the global economy. They have ceased to be a highly specialized tool suitable only for limited categories of goods – auctions are being used more widely and in new formats.
Even the very conservative Nobel Committee acknowledged this trend. As well as the Bank of Sweden, which finances the prize and awards the Nobel memorial prize in Economics. In 2020, it will be awarded to Paul Milgrom and Robert Wilson for “improving auction theory and inventing new auction formats”. It is important to note that the Nobel prizes are awarded not for theoretical research, but for their practical implementation. And Milgrom and Wilson have been implementing new auction formats for many years and “accustoming” a plethora of new industries to auctions.
Milgrom’s achievements have become particularly important in areas where “traditional” auctions have consistently faced issues – selling radio frequencies, selling places in search results, and other auctions where buyers cannot be sure of the benefits of the asset they receive. Because of this uncertainty, participants lower their bids or refuse to participate at all. This is the so-called “winner’s curse” that has plagued auction mechanisms since time immemorial and limited their applicability. Nobel memorial prize in economic sciences winners managed to find a solution to this problem. It sounds simple – for every type of asset being sold, the auction model should be developed individually, taking into account all the features of the market, its players, and the product itself that is being sold.
Among the developments of the Nobel laureates in economics is the model of a double auction, which is simultaneously held among both sellers and buyers, as well as a unique format for combining private and public auctions. At a private auction, one relies on the value of the goods that one assigns personally (for example, selling artwork and antiques), and at a public one (e.g., auction of real estate) prices for assets are generated. Combining these formats allows the market effectively and accurately determine the current prices for almost any product or service. And this is just the tip of the iceberg.
Milgrom and Wilson not only developed a range of auction models for different industries, but also formulated principles for developing new formats for new assets. And it is on these developments that the new auction models created by Merkeleon are based.
Today, Merkeleon is leading the development of B2B auction formats in the field of e-commerce. The company not only offers ready-made new auction models for a wide variety of industries, refining them to meet the individual needs of each customer, but also creates unique individual projects from scratch in accordance with the advanced views of economic science.
Thanks to this, Merkeleon solutions will be useful for a wide range of companies:
- Those who want to create a trading platform with a lot of sellers and buyers
- Those whose business depends on the organization of tender and procurement processes
- Those who want to sell products online, the auction bidding model can be profitable for many product categories
Converting auctions to a digital online format and developing a new auction theory made them the optimal solution for areas where it was previously unthinkable. Even the delivery service can be organized through an auction for courier services. Moreover, it will take place quickly, automatically and unnoticed by consumers. And this will be beneficial to couriers, the site where the auction is held, and customers.
For more information about standard auction models used as the basis for developing custom solutions, visit the Merkeleon website, where you will find all the information about the features provided by every auction model.
In addition, you can discuss your business case with Merkeleon specialists. They will help you consider all possible business models, develop the optimal technical specification, and prepare a software solution that is optimal for your conditions, your tasks, and your requirements.
All methods of business process implementation offered in Merkeleon solutions are based on the research of recognized scientists, supplemented by the latest technologies and ten years of experience in the market. With us, you can implement the recommendations of Nobel laureates in your business projects so that they bring the greatest effect. And, according to the Nobel Committee, this is not an exaggeration at all.