8,562 research outputs found

    Auctioning Rough Diamonds: A Competitive Sales Process for BHP Billiton’s Ekati Diamonds

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    We describe a new approach for selling rough diamonds through competitive auctions. The classical approach of De Beers—giving each customer a bag of stones and a take-it-or-leave-it price—worked well in near monopoly circumstances, but is ill-suited for competitive producers. Competitive producers, like BHP Billiton, benefit from getting the diamonds to those who value them the most. Beginning in 2008, BHP Billiton introduced a simple auction process to assign its Ekati diamonds to the highest bidders at competitive market prices. A Spot auction, ten times per year, is used to establish prices for each of nineteen deals of diamonds grouped by size, color, and quality. A Term auction allows customers to lock in a long-term supply commitment at prices indexed to future Spot auctions. A Specials auction, two or three times per year, prices large stones. The auctions use an ascending-clock format in which prices increase for each product until there is no excess demand. This approach allows customers to discover market prices, while managing portfolio and budget constraints. The approach has proven remarkably successful in pricing and allocating the mine’s output even in the face of the global financial crisis.diamond auctions, market design

    The Role of Auctions in Allocating Public Resources

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    This paper provides an economic framework within which to consider the effectiveness and limitations of auction markets. The paper looks at the use of auctions as a policy instrument and the effects of auction design on consumer interests, the efficient allocation of resources, and industry competitiveness.Australia; Research; Ascending-bid auction; Auctions; Bidders; Conservation funds; Descending-bid auction; Dutch auction; English auction; Environmental Management; First-price sealed-bid auction; Infrastructure; Markets; Oral auction; Outcry auction; Pollutant emission permits; Power supply contracts; Public resources; Radio- spectrum; Second-price sealed-bid auction Spectrum licences; Vickrey auction; Water rights;

    Contract Design for Energy Demand Response

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    Power companies such as Southern California Edison (SCE) uses Demand Response (DR) contracts to incentivize consumers to reduce their power consumption during periods when demand forecast exceeds supply. Current mechanisms in use offer contracts to consumers independent of one another, do not take into consideration consumers' heterogeneity in consumption profile or reliability, and fail to achieve high participation. We introduce DR-VCG, a new DR mechanism that offers a flexible set of contracts (which may include the standard SCE contracts) and uses VCG pricing. We prove that DR-VCG elicits truthful bids, incentivizes honest preparation efforts, enables efficient computation of allocation and prices. With simple fixed-penalty contracts, the optimization goal of the mechanism is an upper bound on probability that the reduction target is missed. Extensive simulations show that compared to the current mechanism deployed in by SCE, the DR-VCG mechanism achieves higher participation, increased reliability, and significantly reduced total expenses.Comment: full version of paper accepted to IJCAI'1

    Review of the Proposed Reserve Markets in New England

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    ISO New England proposes reserve markets designed to improve the existing forward reserve market and improve pricing during real-time reserve shortages. We support all of the main elements of the proposal. For example, we agree that little is gained by allowing reserve availability bids in the day-ahead market. Doing so greatly increases the complexity of the market without the prospect of more efficient pricing. Rather, offline reserves are most efficiently priced and awarded well in advance, as is done by the improved forward reserve market.Auctions; Multiple Object Auctions; Electricity Auctions

    How Best to Auction Oil Rights

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    I study the design of oil rights auctions. A good auction design promotes both an efficient assignment of rights and competitive revenues for the seller. The structure of bidder preferences and the degree of competition are key factors in determining the best design. With weak competition and additive values, a simultaneous first-price sealed-bid auction may suffice. With more complex value structures, a dynamic auction with package bids, such as the clock-proxy auction, likely is needed to promote the efficiency and revenue objectives. Bidding on production shares, rather than bonuses, typically increases government take by reducing oil company risk.Auctions, Oil Auctions, Market Design, Clock Auctions

    Auction Design and the Success of National 3G Spectrum Auctions

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    This study empirically examines a sample of national wireless spectrum assignments for the period 2000-2007 to identify the sources of revenue variations. An econometric model that recognises the censored nature of the sample relates per capita winning bid (per Mhz) values to auction design variables (license award process), national and mobile market conditions, spectrum package attributes and post-award obligations identified from national regulatory authority tender documents. The analysis reveals that most auction design variables independently impact on realized 3G spectrum auction revenue in a manner consistent with auction theory.Wireless telephone markets, 3G spectrum auctions, spectrum bid price

    Eliminating the Flaws in New England's Reserve Markets

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    New England’s wholesale electricity market has been in operation, since May 1, 1999. When the market began it was understood that the rules were not perfect (Cramton and Wilson 1998). However, it was decided that it was better to start the market with imperfect rules, rather than postpone the market for an indefinite period. After several months of operation, we now have a sense of the extent market imperfections have resulted in observed problems. Here we study the three reserve markets—ten-minute spinning reserve (TMSR), ten-minute non-spinning reserve (TMNSR), and thirty-minute operating reserve (TMOR); we also discuss the closely related operable capability (OpCap) market. The paper covers the first four months of operation from May 1 to August 31, 1999. It is based on the market rules and their implementation by the ISO, and the market data during this period, including bidding, operating, and settlement information. Since that data are confidential, we have presented only aggregate information in the tables and figures that follow. Although this paper will cover only the reserves markets, we have studied the data from the energy, AGC, and capacity markets as well. Since all of the NEPOOL markets are interrelated, one cannot hope to understand one market without having an understanding of the others.Auctions, Electricity Auctions, Multiple Item Auctions
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