Types of Auctions
Auctions come in many forms, but all of them have one feature in common: there is at least one item of interest, and different players compete through a bidding process either to buy or sell that item. The player with the best bid—the highest bid when competing to buy, or the lowest bid when competing to sell—is the winner. All the other players lose.
BET ON IT
Virtually all auctions feature asymmetric information; players may know something about what the item is worth to themselves, but they don’t know what it is worth to others. In the language of incomplete information, players may know their own type, but they do not ...