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Enron Mail |
----- Forwarded by Greg Woulfe/Enron Communications on 12/28/00 09:58 AM -----
Chonawee Supatgiat@ENRON 12/22/00 05:08 PM To: Stinson Gibner/HOU/ECT@ECT, Greg Woulfe/Enron Communications@Enron Communications cc: Subject: Combinatorial Auction Stinson and Greg, I have read the paper "Combinatorial Auction with Multiple Winners for Universal Service" from Richard Steinberg and Frank Kelly. They propose a combinatorial auction which is an auction for multiple items that allows bidders to realize their synergies on combinations of items. The combinatorial auction is appropriated for bandwidth commodity because most bidders in the market have synergies on the combination of items. For example, if we want to get bandwidth between Boston and DC, we would bid for Boston-NY and NY-DC. It will be valuable to us only if we won both links. If we won only one link, it will be useless. In the paper, they propose the auctioning method but their method has not been tested or validated yet. I have not checked their proposition mathematically but their paper was published in Management Science so I think it should be all right. I will look at it in more details and let you know. Anyhow, there are also other combinatorial auctions that are actually used, for example, the Alberta government's PPA auction that Enron Canada was participated 3-4 months ago. Based on our long position on bandwidth, Auction and Exchange might be a good channel to dispose our unused (or unsold) bandwidth. I know there is not much demand in the market. But if we open a combinatorial auction or exchange, we might be able to increase our market share. (by taking demand from our competitors). I believe, at the moment, there are no bandwidth exchanges that allow "combinatorial" bids. If we are the first one to do it, we might improve our sale channel and gain some market share. (Note: Auction -< one seller and many buyers: Exchange -< many sellers and many buyers.) Moreover, I think auctioning the unsold bandwidth will not hurt us because we cannot sell them anyway. In addition, we ourselves can be a dummy bidder in the system and bid in the auction. If the current wining bid is too low, we can just over-bid it and keep the product. This way, we can indirectly put a reserve price on the products. Let's meet sometime in the first week of January. -Chonawee
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