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Summary Assignment 1.docx ECO 550 Case Study: Auctions and Dynamic Pricing ECO 550 Managerial Economics and Globalization Introduction There are many different types of auctions that are used for a seller to sale their items. Some auctions are anonymous, an$7.49
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Summary Assignment 1.docx ECO 550 Case Study: Auctions and Dynamic Pricing ECO 550 Managerial Economics and Globalization Introduction There are many different types of auctions that are used for a seller to sale their items. Some auctions are anonymous, an
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Assignment ECO 550 Case Study: Auctions and Dynamic Pricing ECO 550 Managerial Economics and Globalization Introduction There are many different types of auctions that are used for a seller to sale their items. Some auctions are anonymous, and some are public. Companies also use two differen...
assignment 1docx eco 550 case study auctions and dynamic pricing eco 550 managerial economics and globalization introduction there are many different types of auctions that are used for a sell
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ECO 550
Case Study: Auctions and Dynamic Pricing
ECO 550 Managerial Economics and Globalization
Introduction
There are many different types of auctions that are used for a seller to sale their items.
Some auctions are anonymous, and some are public. Companies also use two different pricing
methods, surge, and congestion pricing, to know when a price needs to be increased for better
profits. Auctions assist the seller in finding the best value for their product and can be used in
finance, e-commerce, and e-games. They are also utilized by both for-profit and non-profit
companies. Each auction type has their own advantages and disadvantages it is up to the seller to
determine which type of auction will be utilized.
Auction Types
An English auction is also known as an oral auction. These types of auctions are
common. The auction lasts until there is only one bidder left. English auctions start at a low price
and are increased until the highest bidder is found. Only one individual item is sold during these
auctions. Unlike other auction options, an English auction allows the bidder to gain information
throughout the process. The bidder is able to see when someone drops out due to being out bid
and can determine their value with this information. Before the auction begins, the seller can set
a minimum price point. If this amount is not reached during the auction, the seller can choose not
to see the item.
A Dutch auction differs from an English auction in the sense that the starting price is high
and is then lowered until a bidder accepts the price. The seller starts the price off higher than the
product is worth. They will then work their way down to try to obtain a much from the item as
possible. Once bidder accepts a price, the auction is over. If more than one bidder accepts the
, same price, then the price will start to increase until the highest bidder is found. With a Dutch
auction, there is usually more than one of the same items for sale.
Sealed-bid first-price auctions are also known as blind auctions. In this type of auction,
bidders only have one chance to bid. Each bidder secretly writes down their bid and seals it
before submitting their offer. Every bidder does this at the same time to ensure it is a secret. The
highest bidder will win and must pay the amount they submitted (Froeb, 1). However, depending
on the competition, the bidder must choose if this is the best move for them. When using a
sealed-bid-first-price auction it tends to attract higher bids than the other auction types.
A Vickery auction is also known as a second-price auction. Vickery auctions are very
similar to sealed-bid first-price auctions as the bids are placed anonymously. The only difference
is that the highest bidder only has to pay the second-highest bid. These types of auctions are
uncommon due to the thought of easily cheating during the process.
Surge and Congestion Pricing
When demand for a product increases, the company will raise its prices, known as surge
pricing. When a company uses this pricing method, they also lower the price when demand is
low. An example of a company utilizing surge pricing is Uber. In a high-traffic city where there
are many ride requests, Uber will increase the price. By doing this, it entices the drivers to
service these areas to ensure their customers are happy.
Congestion pricing is utilized for transportation purposes. The primary purpose of this
pricing method is to help reduce congestion on the roads. Like surge pricing, this method
increases the price during these hours. It differs from surge pricing as the supply is not increased
when the price is increased. An example of congestion pricing is express toll lanes that are used
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