Auctions and Dynamic Pricing. Mathematics & Economics Essay

Auctions and Dynamic Pricing
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1. There are many types of auctions each with strengths and weakness at uncovering the real price/value of an item. Compare and contrast how each of the following uncovers value:
a) English and Dutch auctions
Both the English auction and Dutch auction are identified as first-price auctions because the winner is usually the highest bidder. In the English auction, the seller begins the bidding processing by indicating the reserve value. He/she then request other bids while increasing the value by a determined increase. The value of the product is established when no one is willing to match the price of the final bidder. The Dutch auction also follows this process but it occurs in descending order. Therefore, the auctioneer begins at a higher value then decreases it until one of the buyers calls out “Mine!” The item is then purchased by the highest bidder at the value at which he/she called out. Dutch auctions take relatively little time because they do not allow more bids than the number of products being sold (Adam, Eiders & Teubner, 2017). As a result, they are used to sell perishable commodities such as flowers while English Auctions are used to sell antiques, art, wine etc.
b) The sealed bid first-price auction and the Vickery Auction.
In both the Vickery auction and sealed-bid first-price auction, buyers present sealed bids (concealed from the other buyers) to the seller. However, in the sealed-bid first-price auction, the winner is usually the highest bidder. Although the highest bidder is also the winner in the Vickery auction, he/she pays the value that was presented by the second-highest bidder. If multiple products are being sold in a first-price sealed-bid auction, the process is usually referred to as "discriminatory" because not all the highest bidders pay the same amount. Discriminatory auction involves sorting all the sealed bids from high to low and awarding items to the highest bidder until the seller runs out of stock
2. Compare and contrast surge pricing and congestion pricing. Give an example of each currently in use
Congestion pricing is a tactic used to control demand by raising prices but maintaining the same level of supply. Congestion pricing is mostly implemented in utility and hospitality sectors because demand varies with the season of the year or time of the day. The word "congestion" originates from roadway traffic and is used to control congestion by increasing the transport cost of people entering congested regions. New York City became the first US city to impose congestion pricing by charging drivers more before entering crowded parts of Manhattan. On the other hand, surge pricing is used to raise the price of products when demand increases. However, the aim of increasing prices is to motivate more suppliers to come forward. For instance, Uber implements surge pricing during public transport strikes and bad weather. This strategy usually motivates more Uber drivers to work thus increasing supply.
3. Auctions are widely used in finance, e-commerce and in e-games. Identify three uses of auctions by firms in finance, e-commerce and/or e-games.
In Finance, auctions are used in the tran...