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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
Dutch
First-price sealed bid
Second-price sealed bid

English Auctions
The most common type of auction is the English Auction, although it may also be known as an ascending price auction. In ascending price auctions each subsequent bid is higher than the previous one. This is the most popular type of auction for single items.

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/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 you may have guessed, the concept of the Dutch auction originates in the Netherlands. Unlike English auctions which utilize ascending price methods, Dutch auctions are descending price auctions and are commonly used when multiples of the same items are to be auctioned. In a Dutch auction the bidding starts at a relatively high price which is driven progressively downward by bids.

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
Bidder B bids $17 for 5 items
The final result is:
Bidder A would receive 6 items for $17 each
Bidder B would receive 4 items for $17 each

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
Sealed bid auctions differ from the English and Dutch in as much as the bids are not announced to other bidders. The individual bid is only know to the bidder and the seller. This type of auction may be either buyer-bid, where the highest bidder wins the item and pays the amount of their bid, or seller-bid, where the lowest bidder sells the item and is paid the amount of the bid. This form of auction is common for construction contracting, military procurement, foreign exchanges, and other types of goods.

Second-price Sealed Bid Auctions
Another common name for second-price sealed bid auctions is Vickrey auctions (named after William Vickrey) There is a slight variation to the first-price auction for Vickery auctions. In a buyer-bid auction the highest bidder buys the item and pays the amount of the second highest bid. Or in a seller-bid auction, the lowest bidder sells the item and is paid the amount of the second lowest bid.

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.


TODAYS NEWS BY OFFICEJAX FREE ADVERTISING AND AD EXCHANGE SOLUTIONSMORE RESOURCES updated Wed. January / 29 / 2020

‘You’re holding half-a-million bucks!’ NFL auctions bring legendary memorabilia onto Big Game Bound - WSYR
‘You’re holding half-a-million bucks!’ NFL auctions bring legendary memorabilia onto Big Game Bound  WSYR

Shrewsbury auctions foreclosed properties, including historic colonial, totaling nearly $1 million - Community Advocate
Shrewsbury auctions foreclosed properties, including historic colonial, totaling nearly $1 million  Community Advocate

Mario Buatta Auction Shatters Estimates for Chintz - The New York Times
Mario Buatta Auction Shatters Estimates for Chintz  The New York Times

Pottawatomie County Auctions Off Classic Mustangs - news9.com KWTV
Pottawatomie County Auctions Off Classic Mustangs  news9.com KWTV

America's Top 13 Charity Wine Auctions Raised $44.1 Million in 2019 - Wine Spectator
America's Top 13 Charity Wine Auctions Raised $44.1 Million in 2019  Wine Spectator

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Auction Nation Auctioning Off Thousands of Holiday Gift Returns for Pennies on the Dollar  PRNewswire

You can own a piece of Southern Season as the iconic store auctions off its kitchen - Raleigh News & Observer
You can own a piece of Southern Season as the iconic store auctions off its kitchen  Raleigh News & Observer

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Queen Anne Chair Climbs To $87,500 At Keno Auctions  Antiques and the Arts Online

Heavy equipment auction includes excavator, cars ... and a bounce house - Hawaii News Now
Heavy equipment auction includes excavator, cars ... and a bounce house  Hawaii News Now

State surplus auction, now online, starts Jan. 30 - AL.com
State surplus auction, now online, starts Jan. 30  AL.com

Authenticated Trump signature on copy of articles of impeachment could fetch $20K in auction - USA TODAY
Authenticated Trump signature on copy of articles of impeachment could fetch $20K in auction  USA TODAY

Frank Sinatra’s gold-seated, Italian marble toilets fetch thousands at auction - WSFA
Frank Sinatra’s gold-seated, Italian marble toilets fetch thousands at auction  WSFA

More than 100 vehicles available at state surplus auction - ABC6OnYourSide.com
More than 100 vehicles available at state surplus auction  ABC6OnYourSide.com

Poland auctions 5.3 mln carbon permits at 24.04 euros each - EEX - Reuters Africa
Poland auctions 5.3 mln carbon permits at 24.04 euros each - EEX  Reuters Africa

Last minute purchase of Belfast brewery avoids public auction - WABI
Last minute purchase of Belfast brewery avoids public auction  WABI

AuctionTime.com & Auction Flex to Host Auctioneer Forum February 5th in Alberta - Hastings Tribune
AuctionTime.com & Auction Flex to Host Auctioneer Forum February 5th in Alberta  Hastings Tribune

Mario Buatta auction nets $7.6 million, shattering estimates - Business of Home
Mario Buatta auction nets $7.6 million, shattering estimates  Business of Home

Senate C-Band Auction Bill ‘Final’ Version Introduced - Multichannel News
Senate C-Band Auction Bill ‘Final’ Version Introduced  Multichannel News

Public auction of The Bull, Wisconsin's only Jack Nicklaus Signature golf course, canceled 20 minutes before sale was set to start - Sheboygan Press
Public auction of The Bull, Wisconsin's only Jack Nicklaus Signature golf course, canceled 20 minutes before sale was set to start  Sheboygan Press

'House of Prayer' property in Micanopy is up for auction - WCJB
'House of Prayer' property in Micanopy is up for auction  WCJB

Gold-seated toilet among Frank Sinatra items up for auction - ABC News
Gold-seated toilet among Frank Sinatra items up for auction  ABC News

BTS’ Tour Microphones Sell for $83,000 at MusiCares Auction - Rolling Stone
BTS’ Tour Microphones Sell for $83,000 at MusiCares Auction  Rolling Stone

Andy Warhol’s Portrait of Muhammad Ali Could Net £5 Million at Auction - Barron's
Andy Warhol’s Portrait of Muhammad Ali Could Net £5 Million at Auction  Barron's

Leake Auctions sells $17M of vehicles in Scottsdale - AZ Big Media
Leake Auctions sells $17M of vehicles in Scottsdale  AZ Big Media

Sale prices soar past estimates at auction of decorator Mario Buatta's estate at Sotheby's - Art Newspaper
Sale prices soar past estimates at auction of decorator Mario Buatta's estate at Sotheby's  Art Newspaper

Wyatt Earp’s ‘Vendetta Ride’ Shotgun to Sell at Heritage Auctions in Dallas - NBC 5 Dallas-Fort Worth
Wyatt Earp’s ‘Vendetta Ride’ Shotgun to Sell at Heritage Auctions in Dallas  NBC 5 Dallas-Fort Worth

Online state surplus property auction set for this week - WKRG News 5
Online state surplus property auction set for this week  WKRG News 5

Online Wine Auctions: A Beginner’s Guide - Wall Street Journal
Online Wine Auctions: A Beginner’s Guide  Wall Street Journal

Three Incredible Supercars from the 2020 RM Sotheby’s Scottsdale Auctions - Forbes
Three Incredible Supercars from the 2020 RM Sotheby’s Scottsdale Auctions  Forbes

Kansas land up for auction was site of 1870s serial slayings Posted Jan 26, 2020 - hays Post
Kansas land up for auction was site of 1870s serial slayings Posted Jan 26, 2020  hays Post

Mario Buatta’s treasures bring in $7.6 million as Sotheby’s auction soars past sales estimates - The Washington Post
Mario Buatta’s treasures bring in $7.6 million as Sotheby’s auction soars past sales estimates  The Washington Post

To Attract Young Collectors, Auction Houses Tap Rock Stars, Sneakerheads, and a Spice Girl - Artsy
To Attract Young Collectors, Auction Houses Tap Rock Stars, Sneakerheads, and a Spice Girl  Artsy

Stolen Marc Chagall painting sells for $130,000 at auction in Israel - The Jerusalem Post
Stolen Marc Chagall painting sells for $130,000 at auction in Israel  The Jerusalem Post

Seven-Year Note Auction Attracts Modestly Below Average Demand - Nasdaq
Seven-Year Note Auction Attracts Modestly Below Average Demand  Nasdaq

K-pop band BTS's microphones fetch $83,200 at auction - Reuters
K-pop band BTS's microphones fetch $83,200 at auction  Reuters

2020 Las Vegas Motorcycle Auction Week Review - New Atlas
2020 Las Vegas Motorcycle Auction Week Review  New Atlas

Audi 80 Cabriolet Once Owned by Diana, Princess of Wales, Headed to Auction - Car and Driver
Audi 80 Cabriolet Once Owned by Diana, Princess of Wales, Headed to Auction  Car and Driver

Greece says landmark 15-year bond auction successful - WTOP
Greece says landmark 15-year bond auction successful  WTOP

Christie’s New ‘Accessible’ Auction Sells Big Names Starting at $100 - Observer
Christie’s New ‘Accessible’ Auction Sells Big Names Starting at $100  Observer

Japan's fifth solar auction delivers final lowest price of $0.10/kWh - pv magazine International
Japan's fifth solar auction delivers final lowest price of $0.10/kWh  pv magazine International

Humane Society Dinner & Auction set March 21 - News - Canton Daily Ledger
Humane Society Dinner & Auction set March 21 - News  Canton Daily Ledger

More than 100 vehicles up for bid at Ohio surplus auction - 13abc Action News
More than 100 vehicles up for bid at Ohio surplus auction  13abc Action News

Take your pick from these 25 dream machines up for auction in Paris - msnNOW
Take your pick from these 25 dream machines up for auction in Paris  msnNOW

Finnish auction house takes over Wisconsin mink trading hub - Wisconsin State Farmer
Finnish auction house takes over Wisconsin mink trading hub  Wisconsin State Farmer

Objects Returned to Benin by French Collectors Had Been Removed From a Contested Auction - Hyperallergic
Objects Returned to Benin by French Collectors Had Been Removed From a Contested Auction  Hyperallergic

Arizona Car Week 2020: 4 car auctions to see in the Valley this week - ABC15 Arizona
Arizona Car Week 2020: 4 car auctions to see in the Valley this week  ABC15 Arizona

JFK documents tied to ex-California governor sold at auction - Santa Rosa Press Democrat
JFK documents tied to ex-California governor sold at auction  Santa Rosa Press Democrat

Mecum Auctions kicks off annual motorcycle auction - KLAS - 8 News Now
Mecum Auctions kicks off annual motorcycle auction  KLAS - 8 News Now

Student built motorcycle to go on auction block - Black Hills Pioneer
Student built motorcycle to go on auction block  Black Hills Pioneer

New Owner of Md. Home Sold at Auction Finds Body of Previous Resident - NBC4 Washington
New Owner of Md. Home Sold at Auction Finds Body of Previous Resident  NBC4 Washington

Habitat for Humanity Birdhouse Auction Soon - ValdostaToday.com
Habitat for Humanity Birdhouse Auction Soon  ValdostaToday.com

Missouri Auto Auction names new 2nd-generation owners - Auto Remarketing
Missouri Auto Auction names new 2nd-generation owners  Auto Remarketing

Late actor Paul Walker's vehicles garner $2.33 million at Arizona auction - Reuters
Late actor Paul Walker's vehicles garner $2.33 million at Arizona auction  Reuters

Jerry Brown concerned by Sotheby's auction of his dad's rare JFK papers - POLITICO
Jerry Brown concerned by Sotheby's auction of his dad's rare JFK papers  POLITICO

Frank Sinatra auction: Gold-seated toilet, piano, clock among items from Chairman Suite at the former Golden Nugget Casino - CBS News
Frank Sinatra auction: Gold-seated toilet, piano, clock among items from Chairman Suite at the former Golden Nugget Casino  CBS News

Bipartisan Bill Would Ban Reverse Auctions for Federal Construction Contracts - GovExec.com
Bipartisan Bill Would Ban Reverse Auctions for Federal Construction Contracts  GovExec.com

Most Watched Kobe Bryant Rookie Card Auctions on eBay and Values - Sports Collectors Daily
Most Watched Kobe Bryant Rookie Card Auctions on eBay and Values  Sports Collectors Daily

Lee Harvey Oswald's Final Uncashed Paycheck, Up for Auction - TMZ
Lee Harvey Oswald's Final Uncashed Paycheck, Up for Auction  TMZ

Waseca residents partner up to host auctions for Officer Arik Matson; date set for March 14 - KEYC
Waseca residents partner up to host auctions for Officer Arik Matson; date set for March 14  KEYC

Online auctions as a means for selling seized property assets, Nikos Roussanoglou | Kathimerini - www.ekathimerini.com
Online auctions as a means for selling seized property assets, Nikos Roussanoglou | Kathimerini  www.ekathimerini.com

Donald Marron’s $450 M. Collection May Head to Auction: Report - ARTnews
Donald Marron’s $450 M. Collection May Head to Auction: Report  ARTnews

Rare '48 Tucker is just one of the million-dollar-plus cars up for auction this weekend - Yahoo Finance
Rare '48 Tucker is just one of the million-dollar-plus cars up for auction this weekend  Yahoo Finance

Lake County supervisors discuss tax defaulted land auctions - Lake County Record-Bee
Lake County supervisors discuss tax defaulted land auctions  Lake County Record-Bee

Preview: The 2020 Las Vegas Motorcycle Auctions - New Atlas
Preview: The 2020 Las Vegas Motorcycle Auctions  New Atlas

mmWave auction poised to resume, on path to $6B - FierceWireless
mmWave auction poised to resume, on path to $6B  FierceWireless

‘Mona Lisa of Mustangs,’ Raced in ‘Bullitt,’ Sets Auction Record - The New York Times
‘Mona Lisa of Mustangs,’ Raced in ‘Bullitt,’ Sets Auction Record  The New York Times

Centennial couple says the owner of a shuttered auction gallery still owes them money - The Denver Channel
Centennial couple says the owner of a shuttered auction gallery still owes them money  The Denver Channel

Squid Lips Property Goes Up for Auction - Sebastian Daily
Squid Lips Property Goes Up for Auction  Sebastian Daily

Design royalty is all atwitter about the Prince of Chintz auction - The Washington Post
Design royalty is all atwitter about the Prince of Chintz auction  The Washington Post

Solar secures just 5 MW in Italy's first 500 MW renewables auction - pv magazine International
Solar secures just 5 MW in Italy's first 500 MW renewables auction  pv magazine International

Greece starts 15-year bond auction as market rates favorable - WKMG News 6 & ClickOrlando
Greece starts 15-year bond auction as market rates favorable  WKMG News 6 & ClickOrlando

GI Area Habitat For Humanity Dinner/Auction KSNB - Video - KSNB Local 4
GI Area Habitat For Humanity Dinner/Auction KSNB - Video  KSNB Local 4

Thai officials accidentally auction off car loaded with amphetamine - BBC News
Thai officials accidentally auction off car loaded with amphetamine  BBC News

WISD to Host Auction for High Point School Items - thesuntimesnews.com
WISD to Host Auction for High Point School Items  thesuntimesnews.com

County should auction equipment before trading in, attorney says - Post Register
County should auction equipment before trading in, attorney says  Post Register

Basketball HOF to Auction Enshrinement Plaques of Michael Jordan, Shaq, More - Bleacher Report
Basketball HOF to Auction Enshrinement Plaques of Michael Jordan, Shaq, More  Bleacher Report

Annual art auction to go BAAC the last 30 years and into the future - Country 103.9 WRBI
Annual art auction to go BAAC the last 30 years and into the future  Country 103.9 WRBI

Mississippi man accused of stealing cattle from Tangipahoa auction market - The Advocate
Mississippi man accused of stealing cattle from Tangipahoa auction market  The Advocate

104 Vehicles Available at State Surplus Auction Saturday – WKTN- A division of Home Town Media - WKTN Radio
104 Vehicles Available at State Surplus Auction Saturday – WKTN- A division of Home Town Media  WKTN Radio

St. Jude Auction weekend kicks off in Minden - KTBS
St. Jude Auction weekend kicks off in Minden  KTBS

Alexander City Kiwanis Club to host annual dinner and auction - The Alexander City Outlook
Alexander City Kiwanis Club to host annual dinner and auction  The Alexander City Outlook

Online Auction To Benefit Lakeshore Public Schools | News/Talk 94.9 WSJM - News/Talk 94.9 WSJM
Online Auction To Benefit Lakeshore Public Schools | News/Talk 94.9 WSJM  News/Talk 94.9 WSJM

Prairie Warrior Auction set for March 21 | News, Sports, Jobs - Minot Daily News
Prairie Warrior Auction set for March 21 | News, Sports, Jobs  Minot Daily News

Chicago developer Hilco’s $240 million bid wins auction for bankrupt Philadelphia refinery - The Philadelphia Inquirer
Chicago developer Hilco’s $240 million bid wins auction for bankrupt Philadelphia refinery  The Philadelphia Inquirer

Phoebe Waller-Bridge Auctions Golden Globes Tuxedo on Ebay to Aid Australia Fires - Hollywood Reporter
Phoebe Waller-Bridge Auctions Golden Globes Tuxedo on Ebay to Aid Australia Fires  Hollywood Reporter

Shrewsbury auction firm schedules foreclosure auction for Framinghams Aegean Restaurant - MetroWest Daily News
Shrewsbury auction firm schedules foreclosure auction for Framinghams Aegean Restaurant  MetroWest Daily News

Muskie Booster Club Plays to Win with 30th Cake Auction - Discover Muscatine
Muskie Booster Club Plays to Win with 30th Cake Auction  Discover Muscatine

Mustang From Famed ‘Bullitt’ Car Chase Heads to Auction - The New York Times
Mustang From Famed ‘Bullitt’ Car Chase Heads to Auction  The New York Times

Japanese-Imported 1989 Mercedes-Benz 560 SEL AMG Hits RM Sotheby's Youngtimer Auction - HYPEBEAST
Japanese-Imported 1989 Mercedes-Benz 560 SEL AMG Hits RM Sotheby's Youngtimer Auction  HYPEBEAST

Hidalgo County hosting surplus auction on vehicles, equipment this weekend - KGBT-TV
Hidalgo County hosting surplus auction on vehicles, equipment this weekend  KGBT-TV

The Christie's 100 Is Its Most Accessible Auction to Date - Highsnobiety
The Christie's 100 Is Its Most Accessible Auction to Date  Highsnobiety

Mexico's president doubles down on nationalist line: no oil auctions - Reuters
Mexico's president doubles down on nationalist line: no oil auctions  Reuters

Shrewbury auction firm schedules foreclosure auction for Framinghams Aegean Restaurant - MetroWest Daily News
Shrewbury auction firm schedules foreclosure auction for Framinghams Aegean Restaurant  MetroWest Daily News

Christie’s Has Cancelled Plans for a Middle Eastern Art Auction in Dubai, Citing a Lack of Top-Quality Works - artnet News
Christie’s Has Cancelled Plans for a Middle Eastern Art Auction in Dubai, Citing a Lack of Top-Quality Works  artnet News

Sotheby's Auctions Impressionist Paintings Recovered From Nazi Looting; Watercolors by JFK Also Go to Auction - Hyperallergic
Sotheby's Auctions Impressionist Paintings Recovered From Nazi Looting; Watercolors by JFK Also Go to Auction  Hyperallergic

NBA's Sacramento Kings partner with ConsenSys to launch sports gear auctions on Ethereum - The Block Crypto
NBA's Sacramento Kings partner with ConsenSys to launch sports gear auctions on Ethereum  The Block Crypto

Lionel Train Auction Draws Bidders from Across US - businessjournaldaily.com
Lionel Train Auction Draws Bidders from Across US  businessjournaldaily.com

Heritage Charity Auction Settles with EEOC in Employment Discrimination Suit - The National Law Review
Heritage Charity Auction Settles with EEOC in Employment Discrimination Suit  The National Law Review

Hidalgo County to hold surplus auction in Mission - KGBT-TV
Hidalgo County to hold surplus auction in Mission  KGBT-TV

Vintage Ford Bronco sells for $650,000 at auction for Alzheimer’s Association - KTVI Fox 2 St. Louis
Vintage Ford Bronco sells for $650,000 at auction for Alzheimer’s Association  KTVI Fox 2 St. Louis

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