Optimal Auctions, Inc.

"Expert Solutions Improve Your Transaction"

Auction Design is focused on articulating the strategic opportunity, developing a complementary solution, identifying the potential challenges to implementation, and producing auction rules. We first explore or validate the client's strategic goals and desired results, assess the policy, legal, and regulatory environment, analyze the industry issues, and define the assets to be sold or bought. We challenge the conventional wisdom about how transactions were conducted in the past and identify new ways to transact with market participants. We are hypothesis driven when determining our client's needs and when designing the auction rules that best promote our client's objectives such as revenue generation, efficiency, transparency, fairness, and objectivity. As part of the design process, Optimal Auctions works faithfully to incorporate the needs of all stakeholders for clients in either regulated or unregulated environments. Ultimately we seek to provide clients with the greatest leverage to achieve optimal results.

Business objectives are further identified and facilitated through the creation of auction rules. Once we thoroughly understand the client's goals, together we examine the relative costs and benefits of alternative auction designs. New expert auction designs are added to the nearly infinite variety of auctions everyday. Auction types can be ascending or descending, first price or second price, clock or SMR, or sequential or simultaneous. Our involvement in many engagements and our relationships with leading theorists gives us the tools necessary to decide which types of auctions to implement. Designing the appropriate auction rules are critical to ensure risks are eliminated or reduced, and unexpected difficulties are avoided. Auction design greatly affects participants, their eagerness to participate, how aggressively they bid, and to what degree they feel their participation is satisfactory. We work to ensure active participation and that no unintended situations result from participating in an auction. We thoroughly review any proposed auction design, providing clients with feedback on pros and cons, identification of likely outcomes, and recommendations on modifications. This is best accomplished through formalizing the products to be sold and the rules of the auction. By decentralizing decisions and taking account of asymmetric information, we can achieve efficient results.

It's critical to articulate the auction rules clearly, completely, and formally. First, the rules define and describe the product along with any restrictions on ownership, sales, exposure, or other risk. Second, we develop parameters for bidding, bidder credit worthiness, eligibility and activity requirements, allocation, and initial pricing. When writing the rules, we try to balance transaction costs, transparency, and objectivity to achieve the optimal outcome. Many aspects of bidder credit and qualification can be decentralized by applying the appropriate incentives. This means that the seller no longer bears the risk of buyer failure.