What am I bid for all this important advice?

Do you feel nearly £400 richer this week? No? Well, you have not been reading the news. Divide £22.47bn, the amount received by the Government for its auction of mobile phone licences by the population of the UK at 59.009 million, and you get £380.79 a head. That is real resources, available for tax cuts, better services or more sensibly paying off a chunk of the National Debt.

Do you feel nearly £400 richer this week? No? Well, you have not been reading the news. Divide £22.47bn, the amount received by the Government for its auction of mobile phone licences by the population of the UK at 59.009 million, and you get £380.79 a head. That is real resources, available for tax cuts, better services or more sensibly paying off a chunk of the National Debt.

How has the Government come by this money? Answer: instead of giving away radio spectrum or allocating it by civil service fiat, it auctioned it off. And instead of having just one round of bids it kept on publishing each bid and inviting further ones until the last bidder dropped out. If ever you want an example of the efficiency of the auction in determining the maximum amount something can be sold for, this must be the most successful yet.

So auctions are great things, the most efficient way of matching buyer and seller yet devised. Yet most of the goods and services we buy are at fixed prices. Why? Because the auction can be quite a laborious method of trading. You don't know what you will have to pay; it takes time; you cannot go to every auction that might have something of interest; you cannot be sure of what you are buying and so on.

The technology to make the auction more accessible has not existed until now. Enter the internet. Suddenly a technology has arrived that makes it much easier to replace administered prices with the auction system. Several high-profile internet launches essentially exploit the ability of the new technology to match buyers and seller more efficiently. Thus QXL, the online auction house founded by the former Independent journalist Tim Jackson, does this explicitly. Lastminute.com is based on the ability to distribute perishable goods and services that would otherwise go unsold - not an auction itself, but a service that matches buyer and seller more efficiently.

As the technology develops and, more important, as our familiarity with it grows, expect a string of other areas where the auction will enter our lives. Any producer of a perishable item will use the auction to clear unsold stock once someone has figured out a way of organising the process. I would expect empty airline seats to be one of the first services to move in that direction. It is odd that it can cost the same amount to fly mid-week as it does at weekends, given that more people want to do the latter. It is odd that there should be waiting lists for flights. An auction would clear the market so that you could always get the flight you want, provided you paid the appropriate price.

But the most important applications may be in wholesale rather than retail. In the business world the price for components or raw materials is crucial. A few pence either way may be the difference between profit and loss. Already companies are using the Net to winnow out suppliers, often creating online auctions.

The objections individuals might feel - an auction is awkward, or the buyer does not have internet access - do not apply in business-to-business. The likely result will be more use of the auction to ensure all companies pay and receive the market clearing price.

This will take time. But as the business world adapts to the internet, expect the efficiency of the production chain to improve. It will be tough for suppliers who thought they had a secure relationship with a customer to find they have to bid for the best price. But that relationship was secure only if the supplier could offer, maybe not the best price, but a decent enough one to retain the business.

Three obvious lessons for business people spring out. The first is that e-competence is vital. If companies find an increasing proportion of their output is priced by auction they have to make sure their systems can handle this and their inputs are priced by auction too.

The second is that in a world where prices become more transparent it is more important to offer other advantages, so one is not selling just on price. Quality, reliability, after-sales service - all the usual attributes good firms attach to their output - become more important in auction relationships.

And third, companies will have to develop a new caution in pricing. Auctions are wonderful at getting the most efficient matching of buyer and seller, but inexperienced traders make more mistakes at an auction. As anyone who bids for the first time in an auction will know, you come away feeling you let something slip away by not upping the bid when you should have, or you paid far too much for something you never wanted.

Let's hope the bidders for those mobile phone frequencies do not feel the same - though I suspect in five years some ofthe firms that paid us our£380.79 apiece will regret they were so swept up with the thrill of the chase.