When are auctions appropriate?
It’s important to remember that auctions are just one of an array of different mechanisms for vending and distributing goods. And just as there’s no one-size-fits-all format for all auction applications, auctions aren’t always the best or most appropriate allocation mechanism for all goods and all markets. For example, there are list-price sales, where transactions […]
Market abuses in decentralized exchanges
In decentralized exchanges, there is no need to turn to a central authority for clearing, asset custody, or balance updates, because transaction settlement always takes place on-chain. Rather than interacting with a central clearinghouse or custodian, users publicly verify the outcome of trades on the blockchain ledger. All decentralized exchanges feature on-chain settlement. An on-chain […]
Bidding strategies and price discovery
We usually don’t spend a lot of time thinking about how the prices we pay for many goods or services are determined. But prices can be set in a number of ways. In housing markets, for example, where there’s significant bargaining over prices and other terms of sale, prices are determined in a back-and-forth negotiation […]
Designing auctions: Theory and practice
Fundamentally, auctions have two basic purposes: While these are simple outcomes, the paths to arrive at them can be deceptively multi-dimensional. Both real world and online auctions often have to contend with the fact that auctions aren’t always for single items — they often are held for many interchangeable units of the same good — […]
Factors that distort auctions – The sell side
Sellers are capable of distorting auctions away from their most efficient form, either because of a desire to reduce price uncertainty, to extract more gain for themselves at buyers’ expense, or to control what types of buyers will ultimately win the auction. One of the more common ways in which sellers can influence auction outcomes […]
Factors that distort auctions – The buy side
At their simplest, auctions offer a way for sellers and buyers to fairly and dynamically identify a price on which they mutually agree, without the complexity and time consumption of myriad individual negotiations. But even without active manipulation, auctions can be distorted and made less efficient — producing less money for sellers, or reducing satisfaction […]
Understanding auctions – Auction fundamentals
Auctions have become a foundational part of our economy and our society, serving as one of the primary mechanisms by which rights and resources are distributed. Auctions are everywhere, and quietly taking place by the millions, all the time, all around the world. There’s a reason why they’re so common. If you have a good […]