Copenhagen Economics assisted a large international energy company in relation to bidding in UK Leasing Round 4, wit h a better understanding of the bid strategy considerations in the auction process.
Specifically, we organised several workshops where we ran simulations using our custom built software and developed extensive quantitative analysis. Additionally, we formulated a bid strategy “playbook” for the client.
The international energy company wanted to gain a better understanding of bid the strategy considerations for the auction process in UK Leasing Round 4. Specifically, the company wanted to figure out its optimal bid strategy. This depends on both its own and its competitors’ valuations, incentives given the rules of the auction, and beliefs about each other.
The final deliverable was a bid strategy “playbook”, detailing how the client should bid in each day of the auction. To deliver this, we analysed the auction rules thoroughly, coupling our auction expertise with the client’s specific market expertise.
We ran several workshops incorporating custom-built software with interactive tender simulations to facilitate a learning process regarding bid strategy incentives. Workshops participants were asked to bid from their own perspective and were asked to test several bid strategies.
We had produced simulations and analysis to explore the choice and relative payoffs between different approaches. Specifically, we highlighted the key trade-offs between the probability of winning and getting a good price. Based on our analysis, we formulated a specific bid strategy “playbook” for use during the auction which would last several days.
The client developed a better understanding of the different trade-offs in the auction, both through our workshops and the bid strategy “playbook”. This was used in internal decision-making and communication.Download