Auction design for the allocation of multiple units of a homogenous good: Theoretical background and practical experience

Auctions used to allocate multiple units of a homogeneous good account for a large number of transactions in market economies, the most notable example perhaps being the allocation of financial and monetary instruments, such as bonds, bills and securities. The auction format used to sell many identical items has typically been a sealed bid one round auction. Recently, the multi-unit ascending auction format has been recommended as an alternative to the standard format to sell multiple units of a homogenous good. Import quota auctions in Norway represents one notable example of a practical application of this design. The experience with this auction format should be of relevance to other areas where the authorities allocate multiple units of a homogenous good. After some theoretical perspectives on multi-unit ascending auctions, the paper presents some experiences from the allocation of emission permits, securities and import quotas. Thereafter, the Norwegian experience with the ascending auction format used to allocate import quotas is presented.