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Game Theory, Nobel Prize, & Auctions - Auction Primer Series - Part 1
William Vickrey, highly regarded as the founder of auction theory, was an economics professor at Columbia University when he published two papers outlining his views on auctions: "Counterspeculation, Auctions, and Competitive Sealed Tenders", 1961, Journal of Finance "Auction and Bidding Games", 1962, Recent Advances in Game Theory In 1996 he received a Nobel Prize "for fundamental contributions to the economic theory of incentives under asymmetric information." It's important to understand that asymmetric information is an essential component of auctions, where potential buyers have varying levels of knowledge about the value of the item. Although Vickrey considered his work on auctions as "one of my digressions into abstract economics, at best of minor significance in terms of human welfare", to those of us who work with online auctions, much of what he outlined is useful to understanding our marketplace. Vickrey identified 4 general types of auctions: English English Auctions Although traditional ascending price auctions use a "soft close" format - where bidding continues until a final bid is placed, the majority of today's on-line auction sites use the "hard close" format - also known as a 'time interval" auction having a set time limit, regardless of ongoing bidding. It's important to note that in a "soft close" format, bid snipping, that is bidding during the last few seconds or minutes on an item, is eliminated since the auction stays open as long as bids are being made. In an attempt to minimize bid snipping and provide more of a "soft close" characteristic to their "hard close" auctions, eBay allows bidders to use "proxy bidding". In proxy bidding, a bidder enters the highest price they are willing to pay for an item when they first bid. The bid begins at the lowest possible level and increases automatically only if their original lowest bid has been beaten. For more in-depth information on the "proxy bidding capability on eBay go here. http://pages.ebay.com/help/buy/proxy-bidding.html Amazon.com currently offers a feature for their auctions called "Going, Going, Gone." The Going, Going, Gone" feature extends the end of an auction for 10 minutes if a bid is placed effectively creating a "soft close". For more information on the "Going, Going, Gone" feature on Amazon go here. http://www.amazon.com/exec/obidos/tg/browse/-/1161360/103-1666189-8415007#going-gone From the buyers standpoint a "hard close" format is preferable since they may be able to make a final bid before others can react, possibly winning the auction at a lower price. For sellers, a "soft close" format provides an opportunity to realize the maximum price for an item by removing the time restrictions for an auction. As long as bidders are bidding the auction remains open. Dutch Auctions As an example of a Dutch auction let's say you had 10 items you wanted to sell for $20 each. Bidder A bids $18 for 6 items Please note that most Dutch auctions allow bidders to refuse an order for a lesser number of items than what they bid on. A "soft" or "hard close" format may be used in Dutch auctions although the most common is the "hard close". First-price Sealed Bid Auctions Second-price Sealed Bid Auctions The above descriptions provide a general overview of the most popular auction types in use today. Depending on the auction website these general categories may include a number of variations and options such as reserve pricing, open or closed venue, multiple items, fixed price and lot listings to mention a few. Before entering any particular type of auctions make sure you study and understand the rules for that specific type of auction, as the rules may vary from website to website. Copyright © Steven Woodward - All Rights Reserved Steven Woodward is the owner, editor and publisher of the Auction Sellers Network (ASN); a web site for individuals and companies who are serious about utilizing the online auction marketplace for their business. In addition to topical articles, ASN provides an extensive resource center, news feeds and member forums. For more information, or to become a member, please visit us at http://www.AuctionSellersNetwork.com No permission is needed to reproduce an unedited copy of this article as long the About the Author tag is left in tact and included. We do request that we be informed of where it is posted and reciprocal links will be considered.
MORE RESOURCES: Treasures From the Titanic Are Up for Auction, Exciting Collectors The New York Times John Lennonâs âHelp!â Guitar Headed to Auction After Spending the Last 50 Years in an Attic Rolling Stone Investors Flock to Two-Year U.S., German Bond Auctions but For Different Reasons The Wall Street Journal Womanâs car stolen twice, sold by police at auction WREG NewsChannel 3 Ukraine Auctions Off $200M Russian Yacht The Maritime Executive Lone bid cast for Holiday Inn Express by Mount Vernon Triangle - Washington Business Journal The Business Journals Friends of the Baxter County Library Auctions ongoing until Tuesday Mountain Home Observer Portsmouth, NH moves to auction off three seized downtown properties Seacoastonline.com Jamie Clare triumphs in Olds Sport Auctions mini Order of Merit Yahoo Eurosport UK Auction house opens for business in Utica The Central New York Business Journal âReal Housewives of New York Cityâ starâs Manhattan townhouse up for auction at $7.5M PIX11 New York News Pantera Buys Discounted SOL in FTX Auction Crypto Times A lost guitar that belonged to John Lennon is going up for auction in NYC. Here's where to see it. CBS News Real Estate Quarterly: Auctions On the Rise Los Angeles Business Journal Twice the fun with Roncalli Pierside Auction Fox11online.com Cantwell Releases Draft Legislation to Restore FCC Auction Authority, Fund ACP, Rip and Replace BroadbandBreakfast.com Long-Lost Klimt Painting Sells for $37 Million at Auction The New York Times Youth First holds 22nd Annual Passport to Adventure auction 14 News WFIE Evansville Sonja Morgan is auctioning her NYC townhouse after 11 years spent on and off the market New York Post A Castle Built for a Carnegie Will Sell at Auction Mansion Global ViaBTC auctions 'epic sat' after mining Bitcoin's halving block and holding back rewards - The Block Britain Auction | World | hjnews.com The Herald Journal Britain Auction | World | hjnews.com The Herald Journal Important Handwritten Issac Newton Manuscript on Alchemy to Auction Fine Books & Collections Magazine U.S. Treasury auctions off $44 billion of the seven year notes at a high yield of 4.716% - ForexLive Britain Auction | World | reflector.com The Daily Reflector Britain Auction | World | reflector.com The Daily Reflector Long-lost portrait by Gustav Klimt fetches EUR 30 million at Viennese auction Prestige Online Malaysia Al Capone's âSweetheartâ Colt .45 Pistol Announced for Auction by Richmond Auctions Chronicle-Tribune Muhammad Aliâs former lawyer auctions off hundreds of items signed by âThe Greatestâ KTLA Los Angeles US unveils plan for up to 12 offshore wind auctions by 2028 Renewables Now Portrait by Gustav Klimt sells for $32m at Vienna auction Al Jazeera English Landmark Two-Part Auction Realises a Combined Total of ÂŁ2269276 wineindustryadvisor.com Rock Island Auction Company to help Olympians WHBF - OurQuadCities.com Holy Harley Quinn, the comic book cover auction is back! The Winchester Star Champions Circle launches memorabilia auction with Michigan NFL draftees, all proceeds support Team 145 Maize n Brew Estuariumâs benefit auction ends tomorrow The JOLT - The Journal of Olympia Lacey & Tumwater US sets plan for 12 offshore wind auctions over five years 1470 & 100.3 WMBD âWorldâs Greatest Fishing Auctionâ Now Open The Bass Cast The Center Orlando to host âA Seat at the Tableâ art auction Watermark Online Kentucky Department of Fish and Wildlife Resources to hold spring surplus item auction May 6 in Frankfort - NKyTribune User-generated content |
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