The clock auction is provided by one of our partners and represents the current state of the art in multi-product auctions. It can be run either as a “forward” auction, the familiar scenario in which a seller is the auctioneer and prospective buyers make competing bids, or as a “reverse” auction, in which the auctioneer is a buyer who takes bids from prospective vendors. Before the auction begins, the auctioneer announces lot-sizes, price-increments, and numbers of lots available (forward) or required (reverse) for each product.
In the forward auction, prices rise according to Auctionomics’ proprietary “perfect increment” technology: in each round, buyers indicate how many lots of each product they want to buy at the new, higher prices quoted that round. Buyers can change the distribution of their bids among the various products at each round, although an “activity rule,” designed to stimulate participation throughout the auction, prohibits a buyer from increasing the value of its total quantity demanded, as prices rise. The auction ends, and final prices are established, when the market clears for every product: when, for each product, the total number of lots bid upon equals the total number available. The reverse clock auction follow the mirror image of this process, where the buyer-auctioneer’s prices continue to fall until the number of lots offered at that price is equal to the number the buyer needs. Whether buying or selling, the clock auction allows the auctioneer to trade with whatever combination of bidders values the exchange the most.
The table below compares the features of clock auctions, traditional sealed-bid auctions, and the Milgrom Assignment Auction:
|Milgrom Assignment||Traditional Sealed Bids||Clock Auctions|
|Adapted to multiple products||Yes||Yes||Yes|
|Easy to use with simple substitutions||Yes||No||No|
|Allow general expression of substitutes||Yes||No||Yes|
|Finds Exact Market Clearing Prices||Yes||Yes||No|