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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 Tue. September / 29 / 2020

County making switch to property tax lien auctions - The Troy Messenger - Troy Messenger
County making switch to property tax lien auctions - The Troy Messenger  Troy Messenger

Enjoy art and auctions at Farm to Table(aux), benefitting the Boys & Girls Club - Bakersfield Now
Enjoy art and auctions at Farm to Table(aux), benefitting the Boys & Girls Club  Bakersfield Now

100th Bomb Group restaurant up for auction - cleveland.com
100th Bomb Group restaurant up for auction  cleveland.com

"Celebration of the Phillies" Auction Set for October - Sports Collectors Daily
"Celebration of the Phillies" Auction Set for October  Sports Collectors Daily

Ancient Resource Auctions Presents Fall Exceptional Antiquities Sale on October 3 - The National Herald
Ancient Resource Auctions Presents Fall Exceptional Antiquities Sale on October 3  The National Herald

176-year-old block used for slave auctions set to be displayed in museum, with context - KTLA Los Angeles
176-year-old block used for slave auctions set to be displayed in museum, with context  KTLA Los Angeles

Massive Virginia farm and estate just off I-81 heads to auction - Washington Business Journal
Massive Virginia farm and estate just off I-81 heads to auction  Washington Business Journal

Solar auctions to spread PV over the commercial landscape - pv magazine International
Solar auctions to spread PV over the commercial landscape  pv magazine International

Tiger Woods' backup putter from 2001 collects more than $150,000 at auction - Golf Digest
Tiger Woods' backup putter from 2001 collects more than $150,000 at auction  Golf Digest

Cal Ripken Jr & Goldin Auctions Team Up to Offer Historic Collection to Benefit the Cal Ripken Sr. Foundation - Citybizlist
Cal Ripken Jr & Goldin Auctions Team Up to Offer Historic Collection to Benefit the Cal Ripken Sr. Foundation  Citybizlist

David Dike Fine Art Fall Auction Goes Virtual Oct. 3 - Focusdailynews
David Dike Fine Art Fall Auction Goes Virtual Oct. 3  Focusdailynews

NDSU Game Day Auction Scheduled for this Saturday - NDSU - NDSU Bison Athletics
NDSU Game Day Auction Scheduled for this Saturday - NDSU  NDSU Bison Athletics

Selected Western livestock auctions | Livestock Auctions | capitalpress.com - Capital Press
Selected Western livestock auctions | Livestock Auctions | capitalpress.com  Capital Press

American Cancer Society To Hold Virtual Hope Gala Honolulu With Online Auction - Maui Now
American Cancer Society To Hold Virtual Hope Gala Honolulu With Online Auction  Maui Now

Kaminski Hosts Extensive Auction of Fine Furnishings from Waldorf Astoria New York - Yahoo Finance
Kaminski Hosts Extensive Auction of Fine Furnishings from Waldorf Astoria New York  Yahoo Finance

Massive whiskey collection put together by novice may earn millions at auction - Fox News
Massive whiskey collection put together by novice may earn millions at auction  Fox News

9000 Bottle Whisky Collection From A Former "Whisky Novice" Goes Up For Auction - The Whiskey Wash
9000 Bottle Whisky Collection From A Former "Whisky Novice" Goes Up For Auction  The Whiskey Wash

YMCA hosts online auction to benefit scholarship fund - Grand Forks Herald
YMCA hosts online auction to benefit scholarship fund  Grand Forks Herald

US Embassy Bridgetown Online Auction - US Embassy in Barbados
US Embassy Bridgetown Online Auction  US Embassy in Barbados

Bulgarian exchange owner convicted over auction fraud scheme - Cointelegraph
Bulgarian exchange owner convicted over auction fraud scheme  Cointelegraph

Dolly Parton auctions off prized crystals to benefit suffering industry workers - RADIO.COM
Dolly Parton auctions off prized crystals to benefit suffering industry workers  RADIO.COM

Online Silent Auctions Market – increasing demand with Industry Professionals: OneCause, Xcira, Auction Event Solutions - The Daily Chronicle
Online Silent Auctions Market – increasing demand with Industry Professionals: OneCause, Xcira, Auction Event Solutions  The Daily Chronicle

Auction Featuring Vin Scully’s Personal Items Garners Over $2M - CBS Los Angeles
Auction Featuring Vin Scully’s Personal Items Garners Over $2M  CBS Los Angeles

Hall of Famer Vin Scully puts personal items up for auction, including World Series rings, final scorebook - CBS Sports
Hall of Famer Vin Scully puts personal items up for auction, including World Series rings, final scorebook  CBS Sports

Otsego to auction tax-foreclosed properties next month - Oneonta Daily Star
Otsego to auction tax-foreclosed properties next month  Oneonta Daily Star

Massive Private Whisky Collection Set For Auction - InsideHook
Massive Private Whisky Collection Set For Auction  InsideHook

See farm auction draws crowd in Carleton - Monroe Evening News
See farm auction draws crowd in Carleton  Monroe Evening News

Online auction to benefit Lapeer County 4-H | The County Press - Thecountypress
Online auction to benefit Lapeer County 4-H | The County Press  Thecountypress

FGCU Athletics Announces Sustaining Flight Fundraiser and Auction - FGCU Athletics
FGCU Athletics Announces Sustaining Flight Fundraiser and Auction  FGCU Athletics

Silver Dollar Specialties Offered in Month-Long Heritage Auction - CoinWeek
Silver Dollar Specialties Offered in Month-Long Heritage Auction  CoinWeek

Derek Sanderson recalls his playing days ahead of auction - The Boston Globe
Derek Sanderson recalls his playing days ahead of auction  The Boston Globe

AUCTION PREVIEWS Sat. Sept 26th Farm Auction Philadelphia, NY Bush - NNY360
AUCTION PREVIEWS Sat. Sept 26th Farm Auction Philadelphia, NY Bush  NNY360

Asset Equipment Online Auction Market 2020 Forecast Overview, Supply Chain Analysis By – Sandhills Global Inc., Machinery Auctioneers, Ritchie Bros. Auctioneers Inc., Proxibid Inc., Euro Auctions UK Ltd. - The Daily Chronicle
Asset Equipment Online Auction Market 2020 Forecast Overview, Supply Chain Analysis By – Sandhills Global Inc., Machinery Auctioneers, Ritchie Bros. Auctioneers Inc., Proxibid Inc., Euro Auctions UK Ltd.  The Daily Chronicle

France tightens schedule of 5G auctions and deployment in Q4 2020 - Morning Tick
France tightens schedule of 5G auctions and deployment in Q4 2020  Morning Tick

Vista Outdoor Named Successful Bidder in Bankruptcy Auction To Acquire Remington Ammunition and Accessories Assets - PRNewswire
Vista Outdoor Named Successful Bidder in Bankruptcy Auction To Acquire Remington Ammunition and Accessories Assets  PRNewswire

Humane Society's virtual auctions aim to boost fundraising - Bowling Green Daily News
Humane Society's virtual auctions aim to boost fundraising  Bowling Green Daily News

Photo of 11-Year-Old Baller Kareem Abdul-Jabbar Up for Auction - Sports Collectors Daily
Photo of 11-Year-Old Baller Kareem Abdul-Jabbar Up for Auction  Sports Collectors Daily

Lincoln limousines among Kennedy items in Bonhams presidential auction - The ClassicCars.com Journal
Lincoln limousines among Kennedy items in Bonhams presidential auction  The ClassicCars.com Journal

Hard Asset Equipment Online Auction Market 2020 Forecast Overview, Supply Chain Analysis By – Ritchie Bros. Auctioneers Inc., Proxibid Inc., Euro Auctions UK Ltd., Machinery Auctioneers, Sandhills Global Inc. - The Daily Chronicle
Hard Asset Equipment Online Auction Market 2020 Forecast Overview, Supply Chain Analysis By – Ritchie Bros. Auctioneers Inc., Proxibid Inc., Euro Auctions UK Ltd., Machinery Auctioneers, Sandhills Global Inc.  The Daily Chronicle

WAU auctions off Mostert-driven Commodore - Speedcafe
WAU auctions off Mostert-driven Commodore  Speedcafe

A Thoroughly Restored 1961 MG MGA Roadster Will Lead the Petersen Museum’s Online Gala Auction - Robb Report
A Thoroughly Restored 1961 MG MGA Roadster Will Lead the Petersen Museum’s Online Gala Auction  Robb Report

Some Google Search Rivals Lose Footing on Android System - The Wall Street Journal
Some Google Search Rivals Lose Footing on Android System  The Wall Street Journal

Meg White Cymbal Sold at Auction May Have Broken Auction Record - wmmr.com
Meg White Cymbal Sold at Auction May Have Broken Auction Record  wmmr.com

Zachys Breaks Records with Auction of Rare Wines from Italy's Enoteca Pinchiorri - Wine Spectator
Zachys Breaks Records with Auction of Rare Wines from Italy's Enoteca Pinchiorri  Wine Spectator

Ice cream, auctions and hockey jerseys for #NoahStrong - BayToday.ca
Ice cream, auctions and hockey jerseys for #NoahStrong  BayToday.ca

World's First Real Estate DeFi Hits 30X After Auction Launch - Yahoo Finance
World's First Real Estate DeFi Hits 30X After Auction Launch  Yahoo Finance

Solve a Clandestine Coronado Crime with Your Family; First-Ever CSF Auction Gets a Mystery Makeover! - Coronado Times Newspaper
Solve a Clandestine Coronado Crime with Your Family; First-Ever CSF Auction Gets a Mystery Makeover!  Coronado Times Newspaper

Slave auction block covered in graffiti from recent protests, goes on display in museum, with explainer - WGNO New Orleans
Slave auction block covered in graffiti from recent protests, goes on display in museum, with explainer  WGNO New Orleans

UK returning 4,000-year-old artifact to Iraq discovered in online auction - Al-Monitor
UK returning 4,000-year-old artifact to Iraq discovered in online auction  Al-Monitor

Auction of La Grange hand-decorated party carts raises more than $5,000 for non-profit organizations - Chicago Tribune
Auction of La Grange hand-decorated party carts raises more than $5,000 for non-profit organizations  Chicago Tribune

Star-studded Hill Country ranch dances onto auction block for $4.75 million - CultureMap Austin
Star-studded Hill Country ranch dances onto auction block for $4.75 million  CultureMap Austin

Bonnette Auctions announces upcoming auction on Saturday - KALB
Bonnette Auctions announces upcoming auction on Saturday  KALB

Nebraska: What’s Hot on the Auction Block - Columbus Telegram
Nebraska: What’s Hot on the Auction Block  Columbus Telegram

New Mexico national bank note has great back story - Coin World
New Mexico national bank note has great back story  Coin World

Never Before Listed Cabo Del Sol, Mexico Family Compound to Auction Online via Concierge Auctions and Tristen - EIN News
Never Before Listed Cabo Del Sol, Mexico Family Compound to Auction Online via Concierge Auctions and Tristen  EIN News

Telecom News Sept. 28: T-Band Legislature & Calif. First Responder Definition - The National Law Review
Telecom News Sept. 28: T-Band Legislature & Calif. First Responder Definition  The National Law Review

Bidding in first of 2 online auctions for confiscated hunting, fishing equipment open, ends Saturday - KSTP
Bidding in first of 2 online auctions for confiscated hunting, fishing equipment open, ends Saturday  KSTP

‘Holy grail’ of Beatles’ rarities, signed on train to DC concert, up for auction - WTOP
‘Holy grail’ of Beatles’ rarities, signed on train to DC concert, up for auction  WTOP

Unicorn Auctions Offers An Online Whiskey Auction Model To American Consumers - The Whiskey Wash
Unicorn Auctions Offers An Online Whiskey Auction Model To American Consumers  The Whiskey Wash

Ancient sculpture put up for auction in UK to be returned to Iraq - The Guardian
Ancient sculpture put up for auction in UK to be returned to Iraq  The Guardian

Art auction yields funds for United Midcoast Charities' Rapid Response Fund - PenBayPilot.com
Art auction yields funds for United Midcoast Charities' Rapid Response Fund  PenBayPilot.com

GreatCollections to Auction Yellowstone Collection of US Gold Coins - CoinWeek
GreatCollections to Auction Yellowstone Collection of US Gold Coins  CoinWeek

First of two online auctions for confiscated hunting, fishing gear closes Saturday - International Falls Journal
First of two online auctions for confiscated hunting, fishing gear closes Saturday  International Falls Journal

Digital auto auctions are effective and safer - Automotive News
Digital auto auctions are effective and safer  Automotive News

DNR sets two confiscated hunting, fishing equipment auctions for this fall - Brainerd Dispatch
DNR sets two confiscated hunting, fishing equipment auctions for this fall  Brainerd Dispatch

Details On Remington Auction Coming Out - WUTR/WFXV - CNYhomepage.com
Details On Remington Auction Coming Out  WUTR/WFXV - CNYhomepage.com

AUTOMOTIVE EXPERT & CAR-TALK HOST BOBBY LIKIS AUCTIONS ALL ASSETS OF THE CAR CLINIC RADIO BROADCAST - EIN News
AUTOMOTIVE EXPERT & CAR-TALK HOST BOBBY LIKIS AUCTIONS ALL ASSETS OF THE CAR CLINIC RADIO BROADCAST  EIN News

Nashville: An Auction for ACM Lifting Lives Covid 19 Response Fund | Charity Auction - Christie's
Nashville: An Auction for ACM Lifting Lives Covid 19 Response Fund | Charity Auction  Christie's

Legendary Dodgers Broadcaster Vin Scully to Auction Off Personal Items - NBC Southern California
Legendary Dodgers Broadcaster Vin Scully to Auction Off Personal Items  NBC Southern California

Honolulu Police Department auctions evidence online - KHON2
Honolulu Police Department auctions evidence online  KHON2

Sotheby’s auctions AIC professor’s photos - WWLP.com
Sotheby’s auctions AIC professor’s photos  WWLP.com

Centennial’s Lollipop Park auctioning Ferris wheel, miniature train as COVID-19 forces closure - The Denver Post
Centennial’s Lollipop Park auctioning Ferris wheel, miniature train as COVID-19 forces closure  The Denver Post

Teddy Bear Cancer Foundation assists children battling cancer with silent auction - NewsChannel 3-12 - KEYT
Teddy Bear Cancer Foundation assists children battling cancer with silent auction - NewsChannel 3-12  KEYT

City of DuPont Parks & Recreation Auction - The Suburban Times
City of DuPont Parks & Recreation Auction  The Suburban Times

Family Friendly Fun & Online Auction Planned for Dreams 4 All Fundraiser - Southern Pines Pilot
Family Friendly Fun & Online Auction Planned for Dreams 4 All Fundraiser  Southern Pines Pilot

Historic Brunswick hotel sold at auction - Portland Press Herald - Press Herald
Historic Brunswick hotel sold at auction - Portland Press Herald  Press Herald

Fredericksburg Area Museum to exhibit city's slave auction block in November - Fredericksburg.com
Fredericksburg Area Museum to exhibit city's slave auction block in November  Fredericksburg.com

RM Sotheby's Auburn Auction celebrates 50 years of a Labor Day tradition - wpta21.com
RM Sotheby's Auburn Auction celebrates 50 years of a Labor Day tradition  wpta21.com

Auction.com enables remote bidding on live foreclosure properties - HousingWire
Auction.com enables remote bidding on live foreclosure properties  HousingWire

One of the last privately-owned Botticelli portraits could sell for over $80M - CNN
One of the last privately-owned Botticelli portraits could sell for over $80M  CNN

Brazil to end biodiesel auctions, permit imports - Argus Media
Brazil to end biodiesel auctions, permit imports  Argus Media

Leading Auction House Christie's Listing Bitcoin Art for the First Time - Bitcoin News
Leading Auction House Christie's Listing Bitcoin Art for the First Time  Bitcoin News

Arabian horse farm with Patrick Swayze connection up for auction in Texas Hill Country - KSAT San Antonio
Arabian horse farm with Patrick Swayze connection up for auction in Texas Hill Country  KSAT San Antonio

Own a piece of Chiefs history: Union Station memorabilia up for auction - KMBC Kansas City
Own a piece of Chiefs history: Union Station memorabilia up for auction  KMBC Kansas City

Vin Scully’s Personal Collection Of Dodgers Memorabilia Up For Auction - CBS Los Angeles
Vin Scully’s Personal Collection Of Dodgers Memorabilia Up For Auction  CBS Los Angeles

OSU IT Surplus Auction - Okmulgee - Wrightway | Auction Sales - Tulsa World
OSU IT Surplus Auction - Okmulgee - Wrightway | Auction Sales  Tulsa World

'World's largest private whisky collection' goes up for auction - BBC News
'World's largest private whisky collection' goes up for auction  BBC News

El Paso County still holding auctions in person, looking for options to make them safer - KFOX El Paso
El Paso County still holding auctions in person, looking for options to make them safer  KFOX El Paso

Pennsylvania to auction more than 600 vehicles on Oct. 13 - Daily American Online
Pennsylvania to auction more than 600 vehicles on Oct. 13  Daily American Online

Auction Software for Auctioneers Market 2020 Development Insights, Professional Survey on Key Industry Companies – bidlogix, RainWorx Software, Promena e-Sourcing Solutions, 501 Auctions, E-Multitech Solution, Online Ventures Software, Handbid, Auction-Experts, Eastern Unity, BiddingOwl, Ilance, Merkeleon Software - The Daily Chronicle
Auction Software for Auctioneers Market 2020 Development Insights, Professional Survey on Key Industry Companies – bidlogix, RainWorx Software, Promena e-Sourcing Solutions, 501 Auctions, E-Multitech Solution, Online Ventures Software, Handbid, Auction-Experts, Eastern Unity, BiddingOwl, Ilance, Merkeleon Software  The Daily Chronicle

NEF's annual Lighthouse Auction reimagined - The Daily News of Newburyport
NEF's annual Lighthouse Auction reimagined  The Daily News of Newburyport

Online fish fry auction to support Friends of the North Fork of the Shenandoah River - Augusta Free Press
Online fish fry auction to support Friends of the North Fork of the Shenandoah River  Augusta Free Press

How to buy a house at auction - MSN Money
How to buy a house at auction  MSN Money

Equality Maine Plans Virtual Gala and Online Auction - q1065.fm
Equality Maine Plans Virtual Gala and Online Auction  q1065.fm

Hill Country ranch with 234 acres and dance floor created for Patrick Swayze up for auction (slideshow) - San Antonio Business Journal
Hill Country ranch with 234 acres and dance floor created for Patrick Swayze up for auction (slideshow)  San Antonio Business Journal

Aksarben Auction celebrates youth hard work - KSNB
Aksarben Auction celebrates youth hard work  KSNB

Virtual quilt auction to be held | News, Sports, Jobs - Marquette Mining Journal
Virtual quilt auction to be held | News, Sports, Jobs  Marquette Mining Journal

Barnhart auction will be a lifetime of memories - The Hillsdale Daily News
Barnhart auction will be a lifetime of memories  The Hillsdale Daily News

Upper East Side condo conversion fetches $51M at auction - The Real Deal
Upper East Side condo conversion fetches $51M at auction  The Real Deal

HiBid.com Auctions Soared Past $45.3 Million Last Week; Farm Equipment, Coins, Classic Cars & More for Sale Now - PRNewswire
HiBid.com Auctions Soared Past $45.3 Million Last Week; Farm Equipment, Coins, Classic Cars & More for Sale Now  PRNewswire

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