Innovative Auctions

ICANNWiki Bronze Sponsor
Founded:	1993
Headquarters:	6418 Dahlonega Rd. Bethesda MD 20816
Country:	USA
Website:	Cramton Associates
Key People
Peter Cramton, Chairman Pat Sujarittanonta, Affiliate

Cramton Associates specializes in providing advice on auction and market design for multiple industries in many different countries. It was founded by Chairman Peter Cramton, who is a lead expert on auction design and strategy. He is aided by Pat Sujarittanonta as Affiliate. The firm is offering gTLD auction services to applicants in contention in ICANN's New gTLD Program.

Products and Services

Cramton Associates offers complex analyses services, with the following points of interest:

• Data Visualization - Visual data presentation via Tableau.
• Mathematical Analysis - Projections of data and possibilities, including the simulation of alternative auction designs, via Mathematica and MatLab.
• Optimization - Optimization for identifying winners and pricing packages in combinatorial auctions by optimizing programming, via CPLEX and Gurobi.
• Presentation - Excel data reports via Office 2010.
• Statistical Analysis - Data organization and analysis, via Stata.

Affiliates

The company is associated with Market Design Inc., a company offering consulting services for the design of auction markets, as well as Power Auctions LLC, a provider of software, technology, consulting services, and intellectual property for advanced auction applications.

ICANN New gTLD Auctions

In response to the need to determine winners of contention sets for each TLD applied for by more than one applicant, numerous companies have offered their own models gTLD auction models in contrast to ICANN's private auctions, which are by definition a last resort. Cramton Associates is one of the companies offering private auction models, along with Sedo and Right of the Dot. All three groups offer slight variations on implementation and services but share commonalities in their proposed models. In all cases, the winner will pay the amount of the second-highest bid, and money will be split either equally or proportionally between the losers, so that all applicants receive a percentage of their initial investment back. All applicants must agree to participate in a private auction model in order for it to proceed; otherwise, the contention set will be managed via ICANN's auction system, in which all proceeds go to ICANN as "excess funds" that will be allocated at a later date.

During ICANN 45 in Toronto, Peter Cramton outlined an "ascending clock" model, where a price is increased by the auctioneer at each stage; bidders and sellers can then either drop out or bid on the increased amount. This model is also preferred by Right of the Dot, though it has also proposed "sealed bid" and "live auction" models. In a sealed bid model, applicants securely send money via a courier and packages are stored in a safe place until they are opened at the auction session.

Cramton's original model proposed to run auctions during the first quarter of 2013, before ICANN announced the results of their Initial Evaluation. Such a model would allow losing bidders to receive 70% back from their ICANN application fee, but would pose difficulties if winning applicants later discovered their applications were rejected as the other applicants will have withdraw already, and the new gTLD would be left without an owner. The former model also lumped all TLDs that an individual applicant had applied for in one package. Criticisms stating that such a model would benefit larger companies led to a change, so that auctions will now proceed on a TLD-by-TLD basis, with all auctions being simultaneously resolved at the same time.

The new proposal is to hold one set of auctions before Initial Evaluations are posted, with a commitment made before the end of February 2013 and the auction happening in March. The second auction would come after Initial Evaluations are posted with commitment made before the end of August, 2013 and auctions taking place in September. Mock auctions are held before the actual auctions. Cramton Associates has subsequently planned for a third auction to be held around June 2013 for those contention sets that complete their Initial Evaluation early. This plan is currently in flux given that ICANN announced in mid-January that the results of the String Similarity Panel would not be done until March 8th, a significant delay, and would thus the first Cramton auction may not be available until the end of March.

Cramton and Associates have secured their fees at 1% for the first round, 2% for the second round, and 4% for the third round. There is a floor of $1 million USD and a ceiling of $5 million on the third round. The escalation of prices helps account for the higher cost of expenses due to offering multiple application rounds.

Dr. Cramton has conducted research on auction theory and practice since 1983, and has facilitated a variety of high stakes auctions, including a large variety of government auctions for resource rights and distribution rights, with Cramton Associates. Highlights from his high-profile and unique auction experience includes holding the world's first auction on greenhouse gas emissions in the UK in 2002, designing electricity and gas markets in Colombia, and leading the FAA process to auction airport runway slots for New York City airports.

His slides from his most recent presentation on his auction plan, including results and analysis of a mock auction, can be found here.

Cramton Associates' model is preferred by the largest TLD applicant, Donuts. Raymond King, applicant for 10 TLDs with Top Level Design expressed his favor for Private Auctions in general, and Cramton Associates specifically in an opinion piece on CircleID.

Top-Level Domain