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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. August / 16 / 2022

DR Congo Opens Up Oil Auctions to Crypto and Carbon Firms - The Motley Fool
DR Congo Opens Up Oil Auctions to Crypto and Carbon Firms  The Motley Fool

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Sullivan Auctioneers and BigIron Auctions together allow for growth in online auction market  Geneseo Republic

Stuntman Auctions-off Trio of Land Speed Attempt Rolex Watches - HYPEBEAST
Stuntman Auctions-off Trio of Land Speed Attempt Rolex Watches  HYPEBEAST

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DASH named “Official Mobile Auction Platform of the ECHL”  ECHL.com

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DNR to hold 2 online confiscated equipment auctions : Aug 8, 2022 | News release  MN DNR

Maria Capelle Frantz Auctions Megrez Of The Great Above to HarperAlley - Bleeding Cool News
Maria Capelle Frantz Auctions Megrez Of The Great Above to HarperAlley  Bleeding Cool News

Broad Arrow Auctions - New Atlas
Broad Arrow Auctions  New Atlas

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Star Wars CGC Bundle Of Four Issues Up for Auction Today  Bleeding Cool News

Unique Peoria recreational complex is up for auction. Here are details - Peoria Journal Star
Unique Peoria recreational complex is up for auction. Here are details  Peoria Journal Star

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Catch a Glimpse of the Madison 2022 August Live Auction (Wine & Spirit)  PR Newswire

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Daredevil's Takeover of Silver Streak Comics, Up for Auction  Bleeding Cool News

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Branch County Fair auctions bring in over $468000  WTVB

Second half of August to deliver exciting horse auctions ... - Equnews International
Second half of August to deliver exciting horse auctions ...  Equnews International

Eastgate Mall sold at auction - FOX19
Eastgate Mall sold at auction  FOX19

Paintings From Andy Warhol's College Years Will Go Up for Auction - Smithsonian Magazine
Paintings From Andy Warhol's College Years Will Go Up for Auction  Smithsonian Magazine

Surplus Hospital Equipment Auctions - DOTmed HealthCare Business News
Surplus Hospital Equipment Auctions  DOTmed HealthCare Business News

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Grand Prix Tampa auctions off memorabilia  Bay News 9

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Shock Gibson in Temerson & Brookwood's Speed Comics, Up for Auction  Bleeding Cool News

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Why ACV Auctions Stock Popped Today  The Motley Fool

Online Watch Auctions Go Deeper Into Luxury Territory - The New York Times
Online Watch Auctions Go Deeper Into Luxury Territory  The New York Times

Monterey Car Week 2022 Auction Preview: the $10 million cars - New Atlas
Monterey Car Week 2022 Auction Preview: the $10 million cars  New Atlas

Car of the Week: This Rare Briggs Cunningham 1963 Jaguar E-Type Is Revving Up for Auction - Robb Report
Car of the Week: This Rare Briggs Cunningham 1963 Jaguar E-Type Is Revving Up for Auction  Robb Report

Hitler's watch sells for $1.1 million at Alexander Historical Auctions - The Washington Post
Hitler's watch sells for $1.1 million at Alexander Historical Auctions  The Washington Post

Rare Books at Auction This Week - Fine Books & Collections Magazine
Rare Books at Auction This Week  Fine Books & Collections Magazine

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From Neoclassical Paintings to Antique Furniture: Howard Ruby’s Treasure Trove of Old-World Rarities Heads to Auction  Robb Report

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Detroit police auctioning off cars, trucks, RV, and more -- See the auction schedule here  FOX 2 Detroit

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BigIron Auctions acquires Sullivan Auctioneers LLC  Albionnewsonline

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Brooklyn's Weekly Foreclosure Auctions: Who Goes and Why?  Curbed

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Skeleton of a Gorgosaurus Sells at Auction for $6.1 Million  The New York Times

Hitler's Watch Sells for $1.1 Million at Controversial Auction - Smithsonian Magazine
Hitler's Watch Sells for $1.1 Million at Controversial Auction  Smithsonian Magazine

Family Unwittingly Buys Suitcases Filled With Dismembered Bodies at Storage Unit Auction - Yahoo News
Family Unwittingly Buys Suitcases Filled With Dismembered Bodies at Storage Unit Auction  Yahoo News

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Auctions: Drop in Bay of Plenty properties selling under the hammer  Bay of Plenty Times

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The Super-Soldier and Dr. Doom in Yankee Comics #1, Up for Auction  Bleeding Cool News

DoT initiates process to auction more 5G spectrum - Economic Times
DoT initiates process to auction more 5G spectrum  Economic Times

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DMO auctions N225bn bonds, July inflation report... 7 top business news to track this week  TheCable

The Art That Inspired Joan Didion Goes to Auction - Hyperallergic
The Art That Inspired Joan Didion Goes to Auction  Hyperallergic

Mecum Auctions sets new record for event in Harrisburg - WGAL Susquehanna Valley Pa.
Mecum Auctions sets new record for event in Harrisburg  WGAL Susquehanna Valley Pa.

What to Know About a Car Auction | Chase - Chase News & Stories
What to Know About a Car Auction | Chase  Chase News & Stories

Bobby Bonilla's famous deferred contract agreement with Mets sells at auction for $180000 - CBS Sports
Bobby Bonilla's famous deferred contract agreement with Mets sells at auction for $180000  CBS Sports

Kobe Bryant's Ukrainian teammate auctions championship rings at $200,000 for rebuilding efforts - The Sportsrush
Kobe Bryant's Ukrainian teammate auctions championship rings at $200,000 for rebuilding efforts  The Sportsrush

Senators’ new bill expands meat processing to auctions - AGDAILY
Senators’ new bill expands meat processing to auctions  AGDAILY

5 zip codes pay more cash bail; The Philadelphia County Fair; Auction threatens another garden | Morning roundup - Billy Penn
5 zip codes pay more cash bail; The Philadelphia County Fair; Auction threatens another garden | Morning roundup  Billy Penn

Nature’s Nursery hosts nature photo auction - WTVG
Nature’s Nursery hosts nature photo auction  WTVG

Nearly 440 vehicles seized by law enforcement up for auction - CBS Pittsburgh
Nearly 440 vehicles seized by law enforcement up for auction  CBS Pittsburgh

Arlington International Racecourse to Hold a Series of Auctions - NBC Chicago
Arlington International Racecourse to Hold a Series of Auctions  NBC Chicago

Perambulator museum closes, items to be sold through online auction - The Star Beacon
Perambulator museum closes, items to be sold through online auction  The Star Beacon

4-H and FFA livestock auction continues even under difficult circumstances - KTVL
4-H and FFA livestock auction continues even under difficult circumstances  KTVL

ELITE AUCTIONS Announces August 19 Auction of Historic Mansion & Local Landmark in Suffolk, VA - PR Web
ELITE AUCTIONS Announces August 19 Auction of Historic Mansion & Local Landmark in Suffolk, VA  PR Web

This Challenger SRT Demon Is Going To Auction With Only 565 Miles On The Odometer! - Mopar Insiders
This Challenger SRT Demon Is Going To Auction With Only 565 Miles On The Odometer!  Mopar Insiders

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Why Mecum Auctions at the Pa. Farm Show Complex is a ‘rock concert’ for car collectors  PennLive

STORAGE AUCTIONS - Columbia Star
STORAGE AUCTIONS  Columbia Star

Rowley Auctions accepting consignments for upcoming auction - upnorthvoice.com - Up North Voice
Rowley Auctions accepting consignments for upcoming auction - upnorthvoice.com  Up North Voice

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Rose Bowl Commemorates Saturday's Centennial Celebration With Silent and Live Auctions  Pasadena Now

Records Smashed at Junior Fair Livestock Auction | Life & Culture News | richlandsource.com - Richland Source
Records Smashed at Junior Fair Livestock Auction | Life & Culture News | richlandsource.com  Richland Source

July 22, 2022: Auction Calendar - Wisconsin State Farmer
July 22, 2022: Auction Calendar  Wisconsin State Farmer

Unusual Jewelry Finds Eager Buyers In Online Auctions - National Jeweler
Unusual Jewelry Finds Eager Buyers In Online Auctions  National Jeweler

Mike Ditka’s Super Bowl sweater is up for auction - Chicago Sun-Times
Mike Ditka’s Super Bowl sweater is up for auction  Chicago Sun-Times

Thomaston Place Auction Galleries to hold art preview - Courier-Gazette & Camden Herald
Thomaston Place Auction Galleries to hold art preview  Courier-Gazette & Camden Herald

New Jersey Launches Tax Credit Auction for Innovation Evergreen Fund - Marcum LLP
New Jersey Launches Tax Credit Auction for Innovation Evergreen Fund  Marcum LLP

WATCH NOW: 4-H large animal auction at the Lake County Fair - The Times of Northwest Indiana
WATCH NOW: 4-H large animal auction at the Lake County Fair  The Times of Northwest Indiana

Art Base silent auction engages community in art for art’s sake - Aspen Daily News
Art Base silent auction engages community in art for art’s sake  Aspen Daily News

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Porsche 911 Sally Special Heads to Monterey Auction  autoweek.com

Aug. 12, 2022: Auction Calendar - Wisconsin State Farmer
Aug. 12, 2022: Auction Calendar  Wisconsin State Farmer

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HiBid.com Auctions Range from Vintage Comic Books to Gold Bullion Following a $33.4 Million Week  PR Newswire

JGB yields mostly flat ahead of five-year debt auction - Nasdaq
JGB yields mostly flat ahead of five-year debt auction  Nasdaq

100K Ideas brings a fundraising twist to Flint with 'Mystery Box' auction - Flintside
100K Ideas brings a fundraising twist to Flint with 'Mystery Box' auction  Flintside

Unclaimed collectibles for auction at WV State Fair - WBOY.com
Unclaimed collectibles for auction at WV State Fair  WBOY.com

Phillips Presents Digital Soupcan Moment, An Online Auction from Soupcans Labs - ArtfixDaily
Phillips Presents Digital Soupcan Moment, An Online Auction from Soupcans Labs  ArtfixDaily

Explore Three Standout Works by Charles Csuri, a Pioneer of Digital Art, Live Now on Artnet Auctions - artnet News
Explore Three Standout Works by Charles Csuri, a Pioneer of Digital Art, Live Now on Artnet Auctions  artnet News

Former Laker Medvedenko auctions NBA title rings for Ukraine - The Associated Press - en Español
Former Laker Medvedenko auctions NBA title rings for Ukraine  The Associated Press - en Español

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IRS auctions off Sherwood house on 20 acres Monday with bids starting at $482,818  OregonLive

AUGUST 2022 ACTION AUCTION - kmmo.com
AUGUST 2022 ACTION AUCTION  kmmo.com

Four Modern Ferrari Prototypes Are Heading to Auction in Monterey - Road & Track
Four Modern Ferrari Prototypes Are Heading to Auction in Monterey  Road & Track

More than 200 collectables up for auction from North Tampa's vintage village 'Gallopsville' - FOX 13 Tampa
More than 200 collectables up for auction from North Tampa's vintage village 'Gallopsville'  FOX 13 Tampa

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UFC Fighter Auctions Off Used Weigh-In Underwear  MMA News

Sandman #36, A Game Of You, $56 At Auction So Far - Bleeding Cool News
Sandman #36, A Game Of You, $56 At Auction So Far  Bleeding Cool News

Family-run Wheeler Livestock Auction stays up-to-date but true to its roots - AgUpdate
Family-run Wheeler Livestock Auction stays up-to-date but true to its roots  AgUpdate

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ICC Media Rights Auction: ICC officials 'Shocked and Surprised' with broadcasters boycott threat: Follow LIVE UPDATES  InsideSport

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HiBid.com Auctions Approach $40M in Sales Last Week; Bidding Now Open for Coins, Furniture, Antiques, Collectibles, and More  PR Newswire

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This Lykan Hypersport Was Frankensteined From Fiberglass and Porsche Parts. Now It’s up for Auction.  Robb Report

Jordan's 'Last Dance' jersey from Game 1 set for auction - NBC Sports
Jordan's 'Last Dance' jersey from Game 1 set for auction  NBC Sports

IDL Now Offering Opportunity to Participate in Property Sale Auctions Virtually - bigcountrynewsconnection.com
IDL Now Offering Opportunity to Participate in Property Sale Auctions Virtually  bigcountrynewsconnection.com

Savannah Mall sold in online auction for $8.5 million - Savannah Morning News
Savannah Mall sold in online auction for $8.5 million  Savannah Morning News

Youths brave the spotlight in the auction ring | Local News | bakercityherald.com - Baker City Herald
Youths brave the spotlight in the auction ring | Local News | bakercityherald.com  Baker City Herald

$75K winning bid for charity auction trackside luncheon with Ford CEO Jim Farley - Vintage Motorsport
$75K winning bid for charity auction trackside luncheon with Ford CEO Jim Farley  Vintage Motorsport

Celebrate with Artblog! September 15 is our Silent Auction and 19th Birthday Party! - theartblog.org
Celebrate with Artblog! September 15 is our Silent Auction and 19th Birthday Party!  theartblog.org

Missouri auctions off unclaimed property in Kansas City - WDAF FOX4 Kansas City
Missouri auctions off unclaimed property in Kansas City  WDAF FOX4 Kansas City

Fantasy WR Auction Values 2022: Dollar projections, rankings for wide receivers - Sporting News
Fantasy WR Auction Values 2022: Dollar projections, rankings for wide receivers  Sporting News

Ingham, Eaton counties to auction off about 80 foreclosed properties - Lansing State Journal
Ingham, Eaton counties to auction off about 80 foreclosed properties  Lansing State Journal

DJ Kool Herc Auctions Hip-Hop Memorabilia at Christie's - Rolling Stone
DJ Kool Herc Auctions Hip-Hop Memorabilia at Christie's  Rolling Stone

LMPD holding impound lot car auction, including option to bid online - WLKY Louisville
LMPD holding impound lot car auction, including option to bid online  WLKY Louisville

MSU auctions Spartan football memorabilia - WKAR
MSU auctions Spartan football memorabilia  WKAR

Collector Auctions-Off Eleven Like-New Rolex Submariner Hulks - HYPEBEAST
Collector Auctions-Off Eleven Like-New Rolex Submariner Hulks  HYPEBEAST

Buzz Aldrin's Apollo 11 moon jacket auctioned for $2.8 million - NPR
Buzz Aldrin's Apollo 11 moon jacket auctioned for $2.8 million  NPR

10-acre Bay Area estate can't find buyer, heads to auction - SFGATE
10-acre Bay Area estate can't find buyer, heads to auction  SFGATE

Southern Material Culture Dominates Brunk Auctions' $1.3 Million Sale - Antiques And The Arts Weekly - Antiques and the Arts Online
Southern Material Culture Dominates Brunk Auctions' $1.3 Million Sale - Antiques And The Arts Weekly  Antiques and the Arts Online

U.S. launches new 5G mid-band wireless spectrum auction - Reuters
U.S. launches new 5G mid-band wireless spectrum auction  Reuters

James Bond cars heading to auction with other series costumes and props - Autoblog
James Bond cars heading to auction with other series costumes and props  Autoblog

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Bobby Bonilla's infamous contract is up for auction, but no, you won't also get an annual $1.19 million payday  For The Win

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Smith County to auction surplus road and bridge equipment  KLTV

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