Examining the Value of Auctions Mathematics & Economics Essay (Essay Sample)
Auctions can be an important tool for selling goods and gathering information. Auctions are used in multiple venues including agriculture, eBay, and distressed asset sales. The seller does not have to worry about estimating demand and setting a price because the demanders will do that through the auction process.
Write an essay examining the value of auctions in the economy by addressing the following items.
Explain the difference between oral auctions and second-price auctions, including how they work and their results.
Use the expected value information to illustrate how having more bidders in an oral auction will likely result in a higher winning bid.
Explain how the number of bidders in a common value auction affects the outcome of the auction. Relate this to the effect on price in different market structures based on the number of producers.
Auctions lead to outcomes where buyers reveal their value for the products being auctioned. To successfully price discriminate, firms often rely on buyers revealing their value for products. Explain the conditions necessary for firms to be able to price discriminate.
Your essay must be at least three pages in length (not counting the title and references pages) and include at least three peer-reviewed resources. Adhere to APA Style when writing your essay, including citations and references for sources used. Be sure to include an introduction. Please note that no abstract is needed.
Examining the Value of Auctions
Examining the Value of Auctions
An auction is the process of buying and selling goods by offering them to the highest bidder. Goods have been sold through auctions from as early as 500 BC and this means of trade has nowadays become increasingly popular. Through auctions, one is able to sell used cars, paintings, collectibles, expensive wines and even the right to drill for oil on a piece of land. With the growth of technology, online platforms provide auctioneers with a stage to get buyers for any item that is on sale. This essay is a reflection on the value of auctions in an economy.
Most people believe that oral auctions are equivalent to second price auctions. In both cases, the bidder determines the final price of goods or services. Nonetheless, in order for these two types of auction to be equivalent they need to share most traits. Oral auctions are common whereas second price auctions are rare. In both auctions, the item goes to the highest bidder. However, in the oral auctions, the highest bidder pays exactly what they bid. This policy maximizes the potential of the revenue earned by the employer. Winner’s often face the ‘winner’s curse’ and unless one is extremely lucky,
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