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Competitive bids obtained through law department auctions: further thoughts on my article

Legal Times, Jan. 27, 2006, published my article on different forms of auctions law departments should know about. Meanwhile, I continued to collect ideas.

Double auctions. In this auction all the sellers and all the buyers submit bids, which are then ranked highest to lowest to generate demand and supply profiles. From the profiles, the maximum quantity exchanged can be determined by matching selling offers (starting with the lowest price and moving up) with demand bids (starting with the highest price and moving down). This format allows buyers to make offers and sellers to accept those offers at any particular moment.

Suppose four law departments (A, B, C, and D) offer to “sell” their patent preparation work at $4,000, $5,000, $6,000 and $7,000 per patent, respectively. Suppose four law firms (1, 2, 3, and 4) offer to do that work on a unit (per patent application) basis at $8,000, $6,000, $5,500 and $5,000 dollars, respectively. Supply and demand are met at two price points. It might take a specialist intermediary to match the bids. (This material was drawn from Agorics, Inc.)

Unique bid auctions. Law firms submit blind bids after the law department gives them a range of prices for acceptable bids, often with a capped limit. The lowest unique bid wins. For instance an auction is given a maximum bid of 10. If the top five bids are 10, 10, 9, 8, and 8 then 9 would win, being the highest unique bid. Why not state what the law department thinks is appropriate? For more, see Wikipedia and an article.