Auction software development

Quintagroup has 9 years of experience and broad expertise in auction software and API development with various auction types.

Auction types

English Auction

The most widely-known auction type is the English auction also known as the forward or ascending auction. The key feature of this auction type is the gradual increase in price for the item (goods or a service) that is put for sale by the auction organizer when the buyers bid in competition to purchase this item.

It works great in a number of cases:

  • When the item on sale is scarce or rare and, at the same time, is of great interest to several buyers and, therefore, can be sold at a high rate;
  • When there is some hardly disposable property to be sold at a market price;
  • As a possibility to find out the demand for the item in question.

We used the English auction as an instrument for the insolvent bank’s assets disposal within the GDF Financial assets and Other assets procedures, and Property lease procedure in the ProZorro.Sale system.

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Reverse auction

Another type of auction is the reverse or descending auction well-implemented in the ProZorro public procurement system.

The principle of this auction type is, judging by its name, the opposite to the forward English auction. Here, the purchaser becomes the auction organizer claiming the maximal price they are ready to pay for an item of goods or services they need to buy. Sellers of these goods or services take on the role of the bidders who gradually reduce their charges while competing to become the winner of the auction and, consequently, the vendor.

The best applications:

  • Since the procuring entity in ProZorro is the state, this system appeared to be a real budget-saver and corruption-remover for Ukraine;
  • A way to avoid market research and price scan for the buyer - the sellers come and reduce prices;
  • A possibility to find out the product’s or service’s real price, without extra charges.

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Both English and reverse auctions have a similar workflow and shared features:

  • Each auction type starts with an initial price value set by the auction organizer and changes (grows or falls) by a predefined minimal step value.
  • For the sake of fair play, the participants stay anonymous during the whole bidding process.
  • The auctions consist of a certain amount of rounds, each round being limited in time.
  • There is a single auction winner - the one who offers the best price for the organizer.

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Hybrid Dutch Auction

Also called the Combined auction based on the Dutch auction, it is a tool created for NPL disposal for DGF within ProZorro.Sale system. It consists of three stages, each of which is a separate auction type itself: the Dutch auction, Sealed Bid and Best Price auctions.

The Dutch auction

The essential rules of this auction type are the following:

  • The gradual fall of the lot’s price by a certain percentage of its initial price within a fixed time span until one of the participants decides to take the lot at its current price, or the price value reaches its lowest predetermined amount, and the auction finishes;
  • The price reduction rate and the lowest value amount are determined by the auction organizer;
  • The first participant to agree to take the lot becomes the auction winner;
  • New participants may join the auction any time until it finishes.

This is the first stage of the Hybrid Dutch auction and its final lot price becomes the initial lot price for the next stage. The winner of this stage does not take part in the Sealed Bid part.

Sealed Bid Auction

There are known to be two varieties of this auction type: First-price Sealed-bid and Second-price Sealed-Bid auction where the winner pays the first highest price in the former and the second highest price in the latter.

The key features:

  • The bids are made and submitted secretly by each participant within a fixed time period;
  • Nobody is able to see each other’s bid values during the round;
  • When the round is over the bids are disclosed simultaneously;
  • The auction participant submitting the highest bid value becomes the winner.

This is the second stage of the Hybrid Dutch auction. The bids made by the participants here should be higher than the initial value (the price fixed at the first stage).

Best price stage

This is the third stage of the Hybrid Dutch auction which is the chance now for the first stage winner to compete with the second stage winner and offer an even higher payment. It lasts for a limited period of time and its winner becomes the winner of the whole Hybrid Dutch auction.

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Multivariable auction

This auction type, also called multi-attribute auction, is somewhat different from the previous ones due to additional lot evaluation criteria, apart from price.

Let’s list its main prerequisites:

  • The evaluation criteria may include terms of delivery, contract duration, investment and profit correlation, and other negotiable bundles;
  • The bid value is calculated with a formula based on the priority or efficiency ratio of each criterion;
  • By changing the values of the criteria, the auction participants modify the final contract value;
  • Depending on the auction organizer’s needs (role), it can work as either ascending or descending auction.

Possible implementations of this auction type may include:

  • Service providing projects where performance indicators and price are equally important;
  • A more efficient way to collect and compare offers from multiple heterogeneous suppliers;
  • Energy Services Contracts (ESCO) procedure in the ProZorro system in Ukraine, as an example;

Need to see how it works? Fill in this form to get a demo.

Spectrum auctions

The spectrum auctions are pretty field-specific auction types applied for the allocation of electromagnetic spectrum bands to a number of companies by the government. These companies may be television, cell phone, wireless internet or radio signal providers needing to share the scarce spectrum resources. The main features of these auctions include:

  • Allocation of several lots to several bidders simultaneously;
  • In the course of the auction, bidders may change not only their bid values but also the lots they are willing to buy, round by round;
  • During the round, the bidders cannot see the bids of their competitors but the bids are disclosed after each round ends, for the bidders to see the demand for each lot and make a decision as to the next round;
  • By making their bids, the bidders create a certain demand curve for each lot, defining their final prices.

There are typically several auction varieties used for the purpose of spectrum allocation, depending on various reasons.

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Simultaneous multiple-round auction (SMR)

SMR auction is most efficient in situations when there is a need to sell different types of products which are each other’s substitutes but not identical, though. Therefore, the demand for each product lot will be different a priori. For example, this is the best solution for the spectrum being allocated to specific regions of a country.

Main conditions:

  • Each spectrum slice is different in some qualities and is sold as an individual lot;
  • By making their bids, the auction participants may change the lot they wish to buy and the price for them;
  • The amount of rounds is unlimited, the auction goes on until there remains just 1 bidder per lot.

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Clock auction

This auction type presupposes splitting the whole available spectrum into a number of equal interchangeable parts which are then picked by the auction participants. The clock auction can be a perfect solution in cases when the spectrum covers the entire nation and there is a need to distribute its identical parts.

Main conditions:

  • The spectrum parts can be sold in blocks of several;
  • A block with a certain quantity of spectrum parts is viewed as a single lot;
  • By making their bids, the auction participants may change both the number of spectrum parts they wish to buy and the price amount;
  • Each round, therefore, starts with a price set per each spectrum part in the block;
  • The amount of rounds is unlimited, the auction goes on until there remains just 1 bidder per lot.

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Combinatorial auction

Combinatorial auction is the most complicated one here. Similarly to the clock auction principle, the spectrum is split into heterogenous parts, however, not really equal ones. As a result, each lot in the combinatorial auction will be formed as a bundle of spectrum slices which can be each other’s complements or substitutes. Based on its constituents, the value of each bundle will vary - from higher bids for the complementing items to lower for the substituting or the mutually excluding ones.

The defining features:

  • Multiple lots are auctioned simultaneously;
  • A lot may include any combination of the spectrum slices;
  • Bidders may arrive and leave anytime;
  • The system receives information about the relationship between the items based on the bids value changes from round to round;
  • Applying the Vickrey mechanism the winners can be determined by grouping their bids into packages.

Being successfully implemented in the FCC spectrum auctions in the US, the combinatorial auction has been praised as the one generating much more revenue and bringing the most satisfaction to the bidders.

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Real-time bidding

The more audience-oriented approach you take, the better your advertisement works - this is the key principle of a successful advertising campaign. And this is where the real-time bidding technology comes into play. RTB is an auction type designed to sell and buy advertising inventory as impressions or ad views to be seen by the website visitors in the publisher’s corresponding ad slots. The mechanism of RTB is pretty different from all the previous auction types since the whole process happens autonomously and instantly, and requires a high level of integration of all the involved systems. These may include:

  • Supply-side platforms (SSP) functioning as a tool for multiple advertising networks management and yielding ad slots (roughly, the seller);
  • Demand-side platforms (DSP) providing ad suppliers with access to multiple ad inventory sources (roughly, the buyer);
  • Data management platforms (DMS) being the user data (cookies, demographic info, browsing history, geographic location, etc.) suppliers;
  • Agency trading desks - platforms working as third-party mediators between the SSP and the DSP;
  • The publisher that is the website owner.

The workflow of a typical RTB auction takes a few steps:

  1. A user visits a publisher’s website;
  2. The browser sends an ad impression request to the SSP;
  3. Based on user data collected by the DMS and the ad slot parameters, the SSR classifies the request and forms a lot to be sold on an RTB auction;
  4. The SSP redirects the request and user information to the DSP, and the interested advertisers, using the DSP, submit their bids. The advertisers may also request the DMS for additional user data to better understand the lot value;
  5. After all the bids are submitted, the SSP defines the highest one and sells the ad slot to the auction winner. In some cases, the lot can be offered at a discount price of the minimal winning value or the second highest bid;
  6. The auction winner’s ad materials are transferred to the SSP and, consequently, to the target user’s browser;
  7. The target user sees the auction winner’s advertisement.

What is most important, this whole process goes on within milliseconds while the webpage is loading in the user’s browser. For this reason, the main requirements for the RTB system are to take as little processing time as possible, and for the DSP to identify and process a significant amount of user-related parameters by means of good integration with brokers and the ability to analyze those data to make the most accurate bid.

Having Google with its Google Ads service as the key player in this sphere, it is crucial to develop a solution that would be compatible with OpenRTB or Authorized Buyers RTB protocols. These specifications provide the guidelines for software developers about how their applications can evaluate user- and impression-related information, and make bids as ad slots become available in real time.

All market players can benefit from this technology as it helps the advertisers save their resources and increase well-targeted ad views while the publishers sell their ad slots at prices matching the demand depending on each individual user and ad type.

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