Auctions

Abstract

An auction is a form of market with a well-defined set of rules specifying how the participants in the market must behave. There are several different types of auction and these are widely used for selling such diverse items as antiques, works of art, motor vehicles, government debt, fish, meat, cattle, diamonds, houses, land and the rights to exploit natural resources such as oil. There are also auctions for the rights to deliver goods or services — for example, a government may ask for construction companies to bid for the rights to construct a new stretch of highway. These latter auctions are known as buyers’ auctions, since the government will buy from the winning bidder rather than sell to the winning bidder as in the previously described seller’s auctions. For simplicity, the general discussion that follows will be phrased in terms appropriate for sellers’ auctions, but a similar analysis may be applied to buyers’ auctions.