The Awarding Cube®

for Identification of optimal auction designs

Over the spectrum of competition situations, a warm and a cold side (for the bidders) of the Awarding Cube® occur.

According to the Revenue Equivalence Theorem of auction theory, all auction types deliver the same result as expectation value if certian strong prerequisites are fulfilled.

The famous auction theorist Paul Migrom (Cambridge) is quoted with the statement that the Revenue Equivalence Theorem is not of interest because it is true, but because when in practice these prerequisites are not fulfilled, then this deliveres an indication for the auction design with best results. The prerequisites of the Revenue Equivalence Theorem become criteria for the choice of auction design and get to be the axes of the Awarding Cube®.

Another famous auction theorist, Paul Klemperer (Oxford), suggests the “Anglo-Dutch-Auction” (from now on “Klemperer Auction”) as robust, generic auction design if not enough information about the competition situation is available in order to drive a more precise decision. Further more, for the 3G mobile license auction in Hongkong, he suggested an uniform price auction where the bid of the worsed winner becomes the price for all winners. That’s why this auction form is called Hongkong Auction if it is executed as clock auction. The two rounds auction design “Hongkong – Dutch” may be understood as sophistication of the Klemperer Auction.

Finally, the Awarding Cube® utilizes the criteria of the Revenue Equivalence Theorem according to Milgrom and adapts the Klemperer Auction, optimised for the concerned competition situation in each corner of the cube.

Gregor Berz presents the Auction Cube on the 6.th “IFAMD/Allocation Expertenforum Spieltheorie im Einkauf (9:16, german):