Putting auction theory to work: Application of online auctions in the business-to-business context; redefining auction mechanism and rules for ipl auctions

Abstract

This study had two main objectives. The first objective was to understand the importance of the online auctions and the role played by online auctions in the context of business of business markets. The second objective was to apply the concepts learned during the earlier stages and apply them to design an online auction mechanism in a relevant contemporary setting. We have analysed the existing literature on online auctions and analysed the most popular types of online auctions and their relevance to the different types of purchasing orientations shown by the various customers. We have depicted the scenarios and the conditions under which each kind of auction would be most beneficial to both the buyers and the sellers. Finally, after consultation with our guide, we decide to study the current design of the IPL auction and propose the changes required in this design to improve the efficiency of this auction. Our study of IPL auctions showed that important aspects of a team-sport were not taken into account while designing the rules of the auction. A common adage in any team sport is that a great team is greater than the sum of its parts. The IPL auction is designed to maximize the pay-off for the individual players but is not conducive to building a cohesive team. This somewhat inefficient allocation of players has also resulted in disgruntled franchises over the years. We have proposed a variant of the clock-proxy combinatorial auction, as the proposed form of the new IPL auction, as this auction design is ideally suited to manage the complexities involved when the services being auctioned have complementarities. Our objective while proposing this form of auction for IPL was to maximize the pay-off for the players as also for the franchises by also ensuring that the ensuing allocation of players was conducive to building a team by leveraging on the complementarities between different players.