An auction is a great way to get people to reveal the values they place on things. Ebay is built on the concept, and they've been used to value IPOs.
But, here's one setting they probably aren't the best solution.
Hat tip to Division of Labour for the link.
Note: for those who don't get the reference to Coase, click here. The "Coase Theorem" is one of the most widely mentioned concepts in economics.