Essay on Auction Types: Prices of Goods Revealed through Bidding Process

Introduction

In economics, an auction is used in the allocation of goods and price formation through the bidding process. It is a potential process that people use in selling or purchasing of products. The method best suits a variety of goods but is rarely used in acquiring costly items. It is never easy to price an expensive good using this type of mechanism. There are different types of auction used to uncover the price of goods. Both of these types have got a weakness and even strength. This study gives the difference and similarities between some types of auctions.

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Compare and Contrast English and Dutch Auctions

An English auction is also known as the open cry ascending type of auction. In this case, the auctioneer will announce the price of the good, which is on sale. The room is then left for buyers to bid for the cost of the same item. The buyer who will offer the highest is considered as the one with the standing price. In case there are no higher bids, the auctioneer will declare the winner for good. Situations where the highest bid does not meet the economic value of the item, the seller will have a chance of taking it to the market. There are features in an English auction, for instance, those who bid are well informed of the price of the item as well as the number of fellow bidders (Buschbom, Dehring, Dunse & Munneke, 2018). In this type of auction, the seller gives the price of the item, before bidding begins, the auctioneer revealed the identity of other bidders.

On the other hand, Dutch is a type of auction where the setting of the price happens after bidders have quoted their price. In these situations, bidders say their pay, which they think is appropriate for the particular goods concerning its quantity. Determination of the price targets the one coming from the highest bidder. Similarly, in a Dutch auction, the price of a particular good gets lowered until a bid is found. In that instance, the first bid that will arise will be taken as the price of the item. It is totally different from the English type of auction where the cost of the goodwill always rises as bidders compete for the standing bid. Potential customers enter the request according to the number of items they are willing to purchase.

The primary key difference between English and Dutch auction is all about quantity. In an English auction, the highest bidder is targeted with just one batch, whereas in Dutch auction bidding is allocated for several identical items. In English as well, the highest bidder wins while that for Dutch, the winner gets detected between the highest and lowest bidders for the quantity available. Nevertheless, there are also similarities between the two types of action; there are things they share in common.

In both English and Dutch types of action, determination of the price of an item follows the bidding process. The cost of a good cannot rest upon the seller. The next similarity between the two auctions is that the price of the commodity is publicly determined; it is not a secret issue between a particular seller and the buyer but the procedural bidding process. In both the two auctions, the auctioneer controls the whole process of bidding and not the buyer or the seller. Finally, in both English and Dutch, making of profit is very reliable as compared to the loss. The reason as to why profit can rise is, in English, the highest bidder wins, similarly, in Dutch, the auctioneer starts from the highest price.

Compare and Contrast Sealed Bid First Price and Vickery Auctions.

The first price sealed bid auction can also be called blind auction. Here, bidders have to submit the sealed bids simultaneously such that no bidder will know the request for the other colleague. Later on, the one who quoted the highest price will pay exactly the amount. Every participant in this type of auction gets characterized by the monetary value of a particular good on sale (Bushchbom et al., 2018). On the other hand, Vickery auction, which is referred to as a second-price auction, the bidder just looks at the item on sale, then they set the price they feel comfortable paying. The bidder with the second-highest price will get considered the winner. The critical difference between the two types of an auction is that in the sealed-bid first-price sale, the winner is the one with the highest bid while in Vickery auction, the highest bidder will not be the winner but the second most top.

Moreover, sealed bid first price and Vickery auctions share similarities. First, the bidding in both cases is done secretly; that is to say, every bidder does not know what the other fellow has suggested. Participants will not know whether what each has quoted is the higher price or lower price, but the auctioneer will determine after collecting all the bids. Similarly, both the process entails digital types of bidding, the submission is made online for the auctioneer to get accessed to all requests. Finally, tender of the item price is done over its impression; the buyer just looks at the item and suggests the price just fits it.

Compare and Contrast Surge Pricing and Congestion Pricing

Surge pricing is also known as dynamic pricing; it is where business people set the price of goods and services according to the demand in the market at that particular time. The cost can as well change due to competitor pricing or supply in the market. Similarly, the price also relates to other external factors, for example, the price for uber taxis shoots when it rains or late at night when they reduce in number. Buschbom et al. (2018) narrate that the approach of pricing is used in different sectors like hospitals, tourism, or even public transport. Each area takes a different approach in alternating the price of commodities for demand available.

If compared to the congestion price, business people regulate the increase in demand for goods and services hiking their rates. It mostly happens, for example, during the rush hour where bus drivers increase the bus fare. During this period, people will shunt away from operating with public means and wait until the demand has flattened. Economists have detected the most appropriate method using the same technique for setting the price to reduce congestion in urban areas.

In similarities between the two types of pricing, only the owners of the industries using these methods benefit more than the customers. For instance, uber drivers use surge pricing and help them in the general output determination as bus drivers also use the congestion method to earn more. Both pricing methods aim at making the profit; for example, when the demand is very high, there is a shift in the price of the goods and services. The significant dependence on both types of pricing is the demand by customers.

The type of pricing mostly used today is surge pricing. Uber is the current taxi which many people opt for to enhance their movement and even save time. Nevertheless, we are in the period of COVID-19 pandemic, and every individual is practicing social distancing as the precautionary measure to prevent the deadly disease. Several people avoid matatu and go for uber, where surge pricing takes the lead to enhance their movement to keep off the crowd. Finally, the world has gone digital so much so that the automatic calculation of the price is recommended; that is why surge pricing is the one mostly used in today's pricing.

Three Frequent Auctions Used In Finance, E-Commerce, and E-Game

The most three types of actions used in finance, e-commerce, and e-games, include the first price sealed bid, the second price sealed bid, and finally, the ascending request (Holler & Klose-Ullmann, 2020). There is a high need for the auction to uncover the value of commodities. First, there is a high level of honesty, which should be portrayed during bidding. Uncovering the value of goods and services helps a lot during the impression. When the seller is realistic on an item, bidders will determine the range at which they should quote the price.

The other reason as to why the auction should uncover the value of commodities is to avoid the return of these goods. Buyers have got the opportunity to return the goods when their value does not meet their expectations; this might cause misunderstanding and loss of trustworthiness in business. The value of the goods and services, when put in public, enhances the customers to understand the company's quality. Customers always want to attach with the products of higher value; this will increase the net worth of the firm as well as profit.

There is also another type of auction that can best be used to uncover the value of goods or services as compared to other kinds of sales. The best one used to uncover the cost of products is the Dutch type of action is put publicly that the seller unveils all details about the item. Bidders bid the price of the goods with all information as well as the quality of the product. English auction also works best in uncovering the value of the commodity. Buyers will increase the price of the goods during biding, just with a notion that the item has got high value with good quality. If compared to the sealed types of auction, which is more private, the seller can hide some issues and even cover up the value of the goods.

Merits and Demerits of the Auction to the Not-For-Profit Organization

Auction is depicted to have got various advantages to a not-for-profit organization in several ways. The non-profit organization operates while dealing with the government, or local customers operate on limited funding, the auction will help in raising funds. Another advantage of an auction is helping the non-profit organization gaining new donors; this is possible because they create awareness for these organizations (Anderson, 2019). Action help individuals attached to these not profit organization understand their cause and the exact thing they are doing towards the success of the organization.

However, auction as well possesses several disadvantages to these not-for-profit organizations. First, a combination of effort is required; that is to say, without a lot of work, the generation of revenue will not exist. Second, the auction is attached to various risk management; for instance, the place where it will take place. According to Anderson (2019), accommodation for different people is a nightmare. The same hinders people with disabilities and even all ages. In matters concerning housing, gender is also an issue since both males and females perform business. It even appears expensive to accommodate males separately with females in different residential.

Pro-Profit Company Can Uncover Values and Raise Revenue by Auction

The auction still stands as a better way of raising revenue in a company. I am looking forward to work with a company that sells apartment houses. The best way of uncovering the value in such a company is through using an English type of auction. The company will advertise homes publicly through sending pictures of the house, delivering chats of the buildings, and even welcoming the interest parties to bid while on the location physically. The same will make the value of these apartments public for bidders to determine the price. The best way this pro-profit company can raise revenue is by putting more effort into working together as a team. Bargaining is a key to making a profit as well; many sellers should dwell much in negotiation to raise the revenue for the company. Finally, the way this company will increase the revenue is by increasing the number of customers; it can be achieved through upselling to make them stick.

References

Anderson, O. (2019). Financial Stability In Not-For-Profit Organizations: A Case Study.

Buschbom, S., Dehring, C., Dunse, N., & Munneke, H. (2018). Se...