The instructor may choose the type
or types of auctions to use to sell the sponsorship rights of all of the 64
tournament teams. The instructor may choose to sell each of the
sponsorships twice - once in a sealed bid auction and then again in an open
outcry auction. The instructor may also choose to auction off half of the
teams with an open outcry auction and the other half with a sealed bid
auction. If two separate sponsorship auctions are conducted before the
tournament begins, then the instructor can make comparisons between the
different auction designs. Students use
their calculations of the expected values of teams to assist with bidding. The students’ profits are the actual
sponsorship value (determined by success in the tournament) minus the bid
amount paid to the team in the auction.
The students’ objective is to make the most profit.
If two different auctions are used,
the instructor may wish to proceed in the following manner. Beginning the
Monday morning after the tournament teams are selected, students may enter a
sealed bid to purchase sponsorship rights for any team. The sealed bid auction ends at the start of
the open outcry auction (typically held on Wednesday or Thursday morning), so
no bidders can learn anything about the valuations of other bidders during the
sealed bid auction. The results of the
sealed bid auction are not announced until after the open outcry auction
ends.
The second auction is conducted in
an open outcry format and is held during one class period (50-60 minutes). Students take turns placing a team “on the
block” (in any order) by announcing an initial bid for a team still
available. In the open outcry format every student has an opportunity to
win the sponsorship contract by being the highest bidder.