One of the most successful areas in modern game theory is
the modeling of auctions. The theory provides practical advice
to bidders, as well as advice to sellers who wish to maximize
either selling price or social benefit. Mathematical auction
models have been used, for example, by many of the participants
in the recent FCC
spectrum
auctions.
Daniel H. Wagner Associates has used this theory in work for the Minerals Management
Service, which manages offshore (OCS) oil lease auctions
for the Department of Interior. Our "IMODEL" software
enables MMS to forecast the results of its auctions for budgeting
and planning purposes. Because the software involves a game-theoretic
model of the bidding process, it can be used to predict the effect
of changes in the bidding rules. MMS has therefore been able
to use it for policy making, by studying the effects of lowered
minimum bids and revised royalty rules.
