Auction Theory

Types Of Auction English Auction – calling Out lower Price and raising it, auction stops when there is only one interested bidder. Dutch Auction - begins by calling out a price high enough , price is gradually lowered until some bidder indicates interest. Sealed-bid First Price - Bidders submit bids in sealed envelopes, the person submitting the highest bid wins the object and pays what he bid Sealed-bid Second Price - Person submitting the highest bid wins the object but pays not what he bid but the second-highest bid.

Valuations Private Values – ex: consumption good (paintings) Interdependent Values – ex: assets Common Values – ex: bidding, is the same for all bidders

REVENUE VERSUS EFFICIENCY THE SYMMETRIC MODEL : single object for sale, N potential buyers are bidding for the object. Bidder i assigns a value of Xi to the object—the maximum amount a bidder is willing t pay willing to pay for the object. Each Xi is independently and identically distributed on some interval [0,ω] according to the increasing distribution function F. each bidder is both willing and able to pay up to his or her value.

With independently and identically distributed private values, the expected revenue in a first-price auction is the same as the expected revenue in a second-price auction. reserve price : ENTRY FEES: A reserve price (or equivalently, an entry fee) raises the revenue to the seller but may have a detrimental effect on efficiency

Bidding On Ebay:  You are first to bid on one auction with a $14.99 start price. You want to pay no more than $30, so place a bid for $30. You now lead the auction with a bid of $14.99 showing. Your bid will only increase if someone else places a bid. Unless you change your mind, you won't need to bid again. Reserve Price: A reserve price allows you to set a low starting price to generate interest and bidding, but protects you from having to sell your item at a price that you feel is too low. Sniping : bidding in the last few seconds of an auction so that it ends before another bidder gets a chance to outbid you. The idea is that this will get you a lower price

Another Interesting Paper Reference: http://drum.lib.umd.edu/bitstream/handle/1903/1518/umi- umd-1500.pdf?sequence=1&isAllowed=y Use of loyalty Points instead of actual money Two rounds : Primary and secondary Primary: organization (seller) , students (buyer) Secondary: students sell and buy.