When did the practice of auctions start?
Buying and selling things by open public bidding has happened since antiquity. Herodotus has mentioned auctions in Babylon. Several types of auctions - from slaves to seized goods in an armed invasion - are mentioned in Roman and Greek history.
The modern world's oldest auction house is the Stockholm Auction house formed in 1674. Sotheby's and Christie's were formed in 1744 and 1766 respectively. Today auction theory is being studied in applied economics.
Auction theory is also used in designing big auctions like the selling of electromagnetic spectrum and privatisation of public sector companies.
What are the different types of auctions?
There can be many ways to classify auctions. The simplest classification is between open and closed auctions. In the former, participants make repeated bids and everyone is aware how much others are bidding. In a closed auction, bids are sealed. Auctions can also be classified as demand, supply or double.
In a demand auction, 'x' number of buyers bid for a good while in a supply auction 'y' number of sellers offer a good to one buyer. Auctions are also classified as English, Dutch, uniform price, all-pay and so on. The English auction starts with the auctioneer announcing an opening bid, the reserve price for the item.
After this he/she accepts higher bids and finally sells it to the person who is willing to pay the highest. A Dutch auction works in the opposite way as the auctioneer begins with a high asking price which he goes on lowering until someone is willing to pay for the good.
How is the uniform price auction different from the English and Dutch?
The uniform price auction is used to sell a large quantity of goods. It's a closed auction and the auctioneer invites sealed bids from a number of customers. The auctioneer now checks the bids.
Starting from the highest he has to decide at what price there will be sufficient demand so that he would be able to sell his entire stock. He looks at the second highest bid and goes further down to fix a clearing price.
Once the price is fixed, he sells the goods in order of the highest to the clearing price bids. The highest bidder is called first and allowed to get the amount of goods he wants at his bidding price. The process is repeated until the entire stock is cleared.
What is the winner's curse?
In 'common value auctions', where there is no consensus on the value of a particular good among the bidders, it's possible that the winning bidder ends up paying a much higher price than the actual value of the commodity. The most common examples of the winner's curse are witnessed at auctions for rare art and antiquities.
Buying and selling things by open public bidding has happened since antiquity. Herodotus has mentioned auctions in Babylon. Several types of auctions - from slaves to seized goods in an armed invasion - are mentioned in Roman and Greek history.
The modern world's oldest auction house is the Stockholm Auction house formed in 1674. Sotheby's and Christie's were formed in 1744 and 1766 respectively. Today auction theory is being studied in applied economics.
Auction theory is also used in designing big auctions like the selling of electromagnetic spectrum and privatisation of public sector companies.
What are the different types of auctions?
There can be many ways to classify auctions. The simplest classification is between open and closed auctions. In the former, participants make repeated bids and everyone is aware how much others are bidding. In a closed auction, bids are sealed. Auctions can also be classified as demand, supply or double.
In a demand auction, 'x' number of buyers bid for a good while in a supply auction 'y' number of sellers offer a good to one buyer. Auctions are also classified as English, Dutch, uniform price, all-pay and so on. The English auction starts with the auctioneer announcing an opening bid, the reserve price for the item.
After this he/she accepts higher bids and finally sells it to the person who is willing to pay the highest. A Dutch auction works in the opposite way as the auctioneer begins with a high asking price which he goes on lowering until someone is willing to pay for the good.
How is the uniform price auction different from the English and Dutch?
The uniform price auction is used to sell a large quantity of goods. It's a closed auction and the auctioneer invites sealed bids from a number of customers. The auctioneer now checks the bids.
Starting from the highest he has to decide at what price there will be sufficient demand so that he would be able to sell his entire stock. He looks at the second highest bid and goes further down to fix a clearing price.
Once the price is fixed, he sells the goods in order of the highest to the clearing price bids. The highest bidder is called first and allowed to get the amount of goods he wants at his bidding price. The process is repeated until the entire stock is cleared.
What is the winner's curse?
In 'common value auctions', where there is no consensus on the value of a particular good among the bidders, it's possible that the winning bidder ends up paying a much higher price than the actual value of the commodity. The most common examples of the winner's curse are witnessed at auctions for rare art and antiquities.
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