The base premise behind combinatorial auctions is that combining (or “packaging”) bids can create value for the bidder and hence improve commercial outcomes for all participants. Example: A property developer would value two adjacent lots higher than two lots that are not adjoined. If the lots were sold sequentially, the developer would face the dilemma of having to bid for the first lot not knowing whether he/she will be able an adjacent second lot at a reasonable price. A combinatorial auction would allow the bidder to package multiple lots and to place on the package as well as individual lots. The Auctioneer (a.k.a combinatorial auction system) will then determine, whether individual bids or a combination bid create the highest overall auction revenue.
Real time results
An important aspect of combinatorial auctioning is the ability to give instantaneous feedback to bidders. Depending on the packaging rules that apply, this can create a mammoth task of determining the leading bids or bid combinations among millions of possible permutations. As Tradeslot’s combinatorial auction platform can compute large numbers of permutations in near real-time, it is able to give instantaneous feedback on where the bidder stands and what is required to become the lead bidder (bid guidance). A number of our Patents relate to this concept.
Tradeslot’s software has been extremely successfully in unlocking the hidden value of bid packaging. As a practical example, Tradeslot has been running our Combinatorial Auction platform to sell timber logging rights. Logging parcels follow the above logic where acquiring adjacent lots (so-called “coupes”) create efficiencies and therefore higher bids and higher returns.
The applications for combinatorial auctions are boundless across infrastructure allocation, procurement, commodity sales etc. Please contact us to explore this exciting technology and to hear about our clients’ success stories.