Auction theory course: formats, bidding and the winner's curse
The four auction formats, how to bid in each, why they often tie, and how to dodge the winner's curse, learned by bidding.
About this course
Auctions decide who wins everything from spectrum licences to supply contracts, and the format changes how people bid. This course covers the four standard formats in both buying and selling versions, and why they so often produce the same price.
You learn by bidding: against simulated rivals in sealed and open auctions, for a jar of coins whose value nobody knows, and in a market of water-meter suppliers. By the end you can pick a format for a real tender and explain why.
Who it's for: Buyers who run reverse auctions, suppliers who bid in them, and anyone curious about how auctions really work.
What you'll be able to do
- Tell the four standard auction formats apart, in selling and buying versions
- Bid your true cost in a second-price auction and shade sensibly in a first-price one
- Explain why formats often tie and why one more bidder matters more than the format
- Spot a common-value auction and pick a format that tames the winner's curse
Syllabus: 10 lessons
The four formats
Module 1Four formats in one grid
Picture one painting, three bidders and four different rule books. Before anyone raises a hand, the rules have already shaped who wins and what they pay.
The water-meter market: falling, rising, sealed
A water company must replace 7 million household meters after a safety flaw. It earns £100 on each meter it gets back into service. Meters it can't replace earn nothing.
Bidding well
Module 2Second-price: tell the truth
A retailer is buying 10,000 handheld scanners by sealed bid. You're a supplier, and the lowest bid wins. Your full cost per unit is somewhere between £290 and £340, and so is each rival's.
First-price: how much to shade
In a first-price auction, bidding your true value earns nothing even when you win. You have to shade: bid below your value when buying, or above your cost when selling.
The surprising tie, and the value of one more bidder
That's the revenue equivalence theorem (Vickrey 1961; Myerson 1981; Riley and Samuelson 1981).
Strong bidders, shared values and traps
Module 3The Mona Lisa: strong vs weak bidders
A thought experiment: the Mona Lisa goes under the hammer. There are three bidders. A private collector whose limit is €40m. A museum whose limit is €50m.
Common values: the jar of coins
With a private value, each bidder's value is its own: a supplier's cost of making a standard part, say.
Taming the winner's curse
Eight suppliers quote for a first-of-its-kind heat-pump module. The true unit cost will turn out to be £216, but nobody knows that yet.
The escalation trap: the pound auction
The rules, after Martin Shubik's "dollar auction" (1971): a £10 note is auctioned in open bidding, in steps of £1. The highest bidder gets the note and pays its bid.
Choosing a format
Module 4Capstone: pick the format
1) Are values mostly private or mostly common? Common: lean English and share information. 2) Is one bidder much stronger?
Final assessment and certificate
Ten questions on fresh scenarios. Score 7 or more and your certificate is issued straight away.
Questions
How long does the course take?
About 2.1 hours: 10 lessons totalling 114 minutes, plus a 10-minute final assessment. It's self-paced, so you can stop after any lesson and pick up where you left off.
Do I get a certificate?
Yes. Pass the 10-question final assessment (7 out of 10) and you get a certificate of completion with your name and a verification ID. You can retake the assessment as often as you like.
How much does it cost?
£9.89, a one-off payment with lifetime access. Signing up is free, and the first lesson, "Four formats in one grid", is free to play before you buy.
Do I need to know any maths?
No. Everything is explained in plain English with small, worked numbers. If you can compare two prices, you can do this course.
How is it taught?
Every lesson is interactive: you play a game, make a choice or move a slider first, then the idea behind it is explained. There are no videos to sit through.