Discriminatory Auction--More than one item is being sold in a sealed-bid auction. Winners pay exactly what they bid.
Fast Knock--a strategy used by auctioneers to gain attention and to stimulate an audience when the auction is going slowly. He puts up a lot, asks an unusually low opener and quickly knocks the item down (declares it sold) to first bidder.
First Price--when a single item is sold for the exact amount bid. (As opposed to a second-rpice auction when the second-highest price is paid or opposed to a discriminatory auction in which more than one item is for sale).
Jump Bid--a bid suddenly higher than other increments. Has shock value.
One-Shot Auction--only one trading period.
One-Sided Auction-- only bids are permitted, but not "asks". A double auction is not one-sided because bids and asks take place at the same time.
Private Value or Valuation--when an object is wanted for personal consumption and a bidder has no primary motive to resell. The bidder is motivated to pay up to a certain maximum, independent of valuations made by others. Art bought for personal pleasure is an example. A private valuation is a subjective decision. It is private in that one bidder does not know another's value. Sometimes it is possible to infer this information by observing other bidders. What do they bid? When do they stop bidding?
Repeated Auction--more than one trading period.
Reserve Price--lowest acceptable price. Useful in discouraging buyer collusion.
Rings--Some subset of bidders who band together and agree not to compete against each other.
Risk Averse bidders--people likely to raise their bids so that they are more likely to win.
Risk Neutral bidders--people who bid exactly their valuations.
Second-Price Auction The winner pays the second highest bid price. When multiple items are sold, the N-highest bidders are each awarded an item, and all pay the price bid by the N + 1st bidder. This format gives bidders an incentive to bid their real estimate of the value of the goods.
Two-Sided auction--bids and asks allowed. This occurs in a double auction.
Uniform Auction--all the units are sold at the same price (the second-highest bid) in a sealed-bid auction.
Value or Valuation --An object can be acquired primarily for personal use (private value) or acquired for resale (common value).
Winner's Curse--Paying more for item than its value. A winner is suddenly faced with the realization that other participants estimated a lower market value for the item. You win but really lose because your profits decrease (a phyrric victory). The winner is the bidder who made the largest positive error in his valuation. The losers lose the item, but not any money. Anyone winning a bid against experts should wonder why the experts bid less.
In auctions in which no bidder is sure of the worth of the good being auctioned, the winner is the bidder who made the highest guess. If bidders have reasonable information about the worth of the item, then the average of all the guesses is likely to be correct. The winner, however, offered the bid furthest from the actual value.
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Notice of Copyrighted MaterialWork presented here is copyrighted material belonging to Agorics, Inc. (Copyright © 1996, Agorics, Inc.) Agorics, Inc. reserves all copyrights. Agorics disclaims any warranty as to the utility, accuracy or effectiveness of the information contained in this document and specifically disclaims any liability for consequential damages that may result directly or indirectly from use of the information in this document.