The auction, one of the oldest market institutions, is still widely employed in today’s economy for anything from government contracts to the sale of online advertisements to MIT’s Sloan School of Management course assignments. And yet, aside from the small number of economists who are experts in the field, very few people know how auctions operate. This brief, approachable, and interesting book explains the theory and practice of auctions. It includes a variety of real-world examples, discusses the primary auction types and pricing guidelines, and creates a straightforward model to explain bidder behavior.
The authors define an auction and demonstrate how they can be described as asymmetric information games or games in which some players know information that other players do not. They illustrate their discussions with examples from Google, the U.S. Treasury, TaskRabbit, and charitable organizations, as well as auctions staged by eBay and Sotheby’s in order to characterize behavior in these strategic scenarios and keep the conversation grounded in reality. The reader will start to comprehend how economics simulate auctions and how the auction’s rules affect bidder incentives. They will see the value of auctions in our contemporary market and comprehend why these selling techniques are so durable.