Examining the Value of Auctions

EXAMINING THE VALUE OF AUCTIONS
Name
Instructor
Institution
Date
Introduction
Auctions are essential for any industry, and some businesses depend on auctioned goods to run. The competitive nature and its dynamism are what make auctions to be quite impressive. Auctioning is a mechanism for purchasing and selling goods or services by bidding. It is a technique that allows people to bid and sell to the highest bidder. According to Bapna et al. (2009), an auction is a public sale of property or products governed by specific rules that depend on bids from participants, distribution resources, and determining prices. Auctioning has been the way to go for several generations. Auctioned products allow these businesses and business people to acquire a product at a great bargain, especially the rare products. However, it is quite important to keep an open eye on the auctioning process to avoid falling into pitfalls that come with the same. This is because there are no rules on pricing when it comes to the process of auctioning.
Define Oral and Second Price Auctions
English auction is another name for oral auction. In this auction, the auctioneer continues to bid until he is left with one bidding price only available to one bidder. In other words, the auctioneer continues to auction the commodity between a certain number of bidders until he is left with only one bidder who can pay that exact sum. Bidders get out bided, one after the other, and they are systematically and automatically eliminated from the running (Bapna et al., 2009). The approach allows the auctioneer to get the highest sum of money as it is the elementary tool that eliminates bidders one after the other. Oral auction is more beneficial to the owners of the products as they get the best deal of money. After the end of the auction, the buyers take home their purchase without incurring additional costs such as shipping fees after reaching the end of the deal.
When it comes to a second price auction, when the auctioned commodity is finally auctioned, the bidder must pay the second-best price of the object bid during the auction. The strategy allows the winning bidder to pay the bidding price of the second-highest bidder by an additional $0.01. the approach guarantees buyers some confidence to bid esteemed prices without overpaying. The second-price mechanism motivates buyers to raise their bid prices gradually as they understand that if they win, they will pay low than their bidding prices during the auctioning process. It is becoming increasingly binding. The individuals do not post a higher bid above $100 established for the products to avoid paying way more price. Besides, the individuals should not post a lower bid of the maximum value of $100 to avoid losing the product's price less than the amount they can pay. According to Bapna et al. (2009), the bidders understand the true signal about the product's true value, and the buyer with the highest value is right about the true value. For example, if two individuals, A and B, compete for the same product with respective prices of $105 and $103, A win the bid but only pays $103.
The expected value information related to the oral auction
When there are more bidders, the item's price will go up. The co...