English Auction:
- First price ascending order
- Most common
- Bidding starts at reserve price
- Bidding increases (usually in increments)
- Bidding stops after the last bid and the person who made the last bid pays what they
paid for
Dutch Auction:
- First price descending order
- The quick one
- Bidding starts at a very high price
- Bids decrease in increments
- Auction is generally over very quickly as it ends when someone accepts a price they
are willing to pay.
Sealed bid auction first price:
- Most common in procurement, construction work
- Bidder states price without revealing it to the other bidders.
- Observed by organisers
- Good will be auctioned to person who made the last bid and is willing to pay the
highest price
Sealed bid auction second price:
- Also called vickery auction
- Variant of sealed bid first
- eBay is an example
- Bidder states price without revealing it to the other bidders.
- Bids are observed by organisers
- Good will be auctioned to consumer who made the last bid, but they pay the second
highest price.
Auction design goals
Profit maximisation:
- Seller receives the highest expected profit
- First goal of an auction
Pareto efficiency:
- Outcome of the auction is pareto efficient
o Impossible to reallocate in such a way that one individual is better off
without making at least one other worse off
- Good has to be allocated to buyer with the highest value of the good
English auction
- With reserve price
o Must be pareto efficient
o Bidder with highest bid will have the good
- First price ascending order
- Most common
- Bidding starts at reserve price
- Bidding increases (usually in increments)
- Bidding stops after the last bid and the person who made the last bid pays what they
paid for
Dutch Auction:
- First price descending order
- The quick one
- Bidding starts at a very high price
- Bids decrease in increments
- Auction is generally over very quickly as it ends when someone accepts a price they
are willing to pay.
Sealed bid auction first price:
- Most common in procurement, construction work
- Bidder states price without revealing it to the other bidders.
- Observed by organisers
- Good will be auctioned to person who made the last bid and is willing to pay the
highest price
Sealed bid auction second price:
- Also called vickery auction
- Variant of sealed bid first
- eBay is an example
- Bidder states price without revealing it to the other bidders.
- Bids are observed by organisers
- Good will be auctioned to consumer who made the last bid, but they pay the second
highest price.
Auction design goals
Profit maximisation:
- Seller receives the highest expected profit
- First goal of an auction
Pareto efficiency:
- Outcome of the auction is pareto efficient
o Impossible to reallocate in such a way that one individual is better off
without making at least one other worse off
- Good has to be allocated to buyer with the highest value of the good
English auction
- With reserve price
o Must be pareto efficient
o Bidder with highest bid will have the good
