English and Dutch auctions.
- There are many types of auctions each with strengths and weakness at uncovering the real price/value of an item. Compare and contrast:
In an English auction, the values of the given property are given in increments so that each bidder knows the bid value of other bidders and the property is sold at the highest bid (Brown & Pawlowski, 2016). This method of auctioning is very popular around the world and is an important tool to judge people’s readiness to pay a certain amount for a certain profit. Because the auction includes an auction and a counter offer, it is unlikely that human emotions and ego are considered so that sometimes the value of the property is overwhelming. However, incompetence is probably the reason why the English auction is a good revenue generating tool.
The Dutch auction (also known as the tulip auction) is an auction in which the auction sets a high price to start the process, but the price is reduced (reduced) (Mridha & Bhattacharyya, 2017). The first person to receive the price is the one who sells the goods. It differs fundamentally from the English auction, since bidders in this case do not know what others are, and since the first agreed price is the retail price of the transaction, the other offers a lower emotional component. An excellent indicator of resource value.
The sealed bid first price auction and the Vickery Auction.
The auction price covered for the first edition is among the easiest to find. Bidders record their offers and bundle them with envelopes. As such, the auction unlocks all envelopes at the same time and the transaction is sold at a price offered by the largest bidder (CorporateFinanceInstitute, 2019). While this method does not do much to raise prices because there is no competition, it will help you determine exactly how much each candidate appreciates what they have done.
However, at the Vickery auction, the procedure is the same except that, at the end of the sale of the property, the second highest rate is paid, plus some bonuses instead of the offer. In all cases, all participants will be notified of each other’s offers, but there is always the possibility of making a bid for each activity (CorporateFinanceInstitute, 2019).
An auction in English is a very useful tool to know the price of a property or transaction whose value may be unknown. The idea is to allow competition to increase prices and, since the value may not be known, the price that participants are willing to pay is considered the value of the property. However, the auction process in English is not perfect. There is always a possibility of fraud when bidders work with or between auctions. Bidders can coordinate to keep their bids counterfeiting (although this is very rare, since those who lose bids do not have a profit that can be profitable for them). On the other hand, if one of the bidders is involved with the auction, the prices may increase dramatically, which is similar to the auction fee charged by the auctioneer (Therealdeal, 2019).
- Concierge Auctions Limited sells very high end and unique properties worldwide using an English style auction, selling to the highest bidder. They have been embroiled in multiple law suits, see the link to the Wall Street Journal. Advise Concierge as to the weakness that an English auction may have in uncovering a property’s value. Provide a recommendation for at least one other auction type which may better uncover the value of unique real estate properties.
Another important problem with the English auction is that it brings a lot of excitement and offers and counter offers. Sometimes people accept the opposing version as an insult to the ego. As a result, the price of the property involved may be higher than the actual bond. If the English version is unsuitable for the one who cares, a closed version or a Dutch auction is the solution. The main advantage of any of the alternatives is that some competitors don’t know what others are offering. As a result, the ability to play is weakened and the absence of artificial ensures that sensory engagement is reduced (Therealdeal, 2019). All of these factors contribute to the fact that the bidding process, especially for unique properties, is complete and cannot be shown with your finger.
Benefits of bidding are not restricted to permanent copies or artifacts. In fact, money is replete with examples of practical application of auction theory. The most popular example is the company’s IPO. The logic of the ILO is that, since the shares are sold for the first time, we do not have an exact measure of the company’s value to the investors. So, it’s best to try to find out what investors are giving to the company. The type of auction depends on the wishes of the company, as each of the four types of auction can be used. The best-known company, Google, organized the Dutch auction when it was published in 2004. Considering the weakness of the British auction and the fact that it offers so much enthusiasm, the Dutch auction may be the best choice for the stock market. The company will never require the highest public edition, so that its shares will be released early in the secondary market. So, an option with a lower emotional level would be a better choice.
- Auctions are widely used in finance, e-commerce and in e-games. Identify 3 uses of auctions by firms in finance, e-commerce and/or e-games. Explain the: a) need for an auction in the product/service; and b) what type of auction is used and why that type of auction is appropriate for the product/service
Similarly, in the electronic business, the bidding process is also widely used in client premises. The large e-bay online is a great example. People may know how many football shirts they sell, but they don’t know how much a football player sells a football shirt. This means that there is no distribution curve since there is only one product. This means that the marginal cost cannot be determined and, therefore, the auction is used to determine its price. For this reason, they take e-bay and they exchange the product they want to sell. While different sites use different offer methods, e-bay uses Vickrey’s versions, where the highest version pays the next offer.
Another example of an auction in a financial industry is an entire company auction in case of bankruptcy. In this case, the assets of the company often do not rely on the fact that the auction must be organized to determine the number of people willing to make an assessment. For value discovery, we use dynamic prices or, in other words, auctions. In such cases, the auction will be in English. The reason is that the version is taken from a much higher price for most lenders to pay.
Non-profit organizations (NPOs) have many sources of income, one of which is auction. Like all other options available to nonprofit organizations, auctions also have advantages and disadvantages. The main advantage of the NPO at auction is that it increases the income of the NPO, which can be used in areas where the NPO needs money. For example, the government (also OOP) organizes auctions for its projects. Then use the purchased product to fund your social protection goals, such as: managing public schools and hospitals. In addition, auctions can earn more money if ONP can attract private investors. And while this may increase auction costs, it will be beneficial for the NPO to establish long-term business contacts that will increase revenue in the form of donations.
- Auctions are also widely used to generate revenue for not-for-profit organizations. What are the advantages/disadvantages of auctions as revenue generators for not-for-profit organizations?
The auction as a source of income for the certifying authority has several problems. In addition to the cost of the event to consider, there is also the risk that the auctioneer may not provide the funds that the ONP may claim. This is very problematic because UFOs have no experience in risk management and hiring a professional is a cost that ONO cannot afford. As a result, they are forced to bid despite the risks. A possible disadvantage of the auction is that it is not a “source of income” for OPN, but only one income. Therefore one cannot rely on it in the long run.
The auction is very important to generate revenue or discover the value of the business. For an investment banker, not only can the auction device be used, but it can also be expanded to improve earnings improvement. Investment Banks are often responsible for the IPO of several publicly traded companies. One can use the Dutch auction to determine the real value of your offer or the guarantee that investors offer on the bond. Investment Banks also typically oversee mergers and acquisitions (Mridha & Bhattacharyya, 2017). This is an important step because there are always disputes over the value of corporate responsibility. These changes can be solved to some extent through auctions. While it is difficult to define the exact nature of the action, since the auction would require more interest from the same company, choosing an auction route is not clear. The Dutch auction by Vickrey seems to be the logical answer, since the purpose of this auction is not to raise revenue but to obtain value.
- Suggest ways in which the company you work for, or the company which you aspire to work for, can use auctions to better uncover value and increase revenue.
If the auction can be adequately advertised, the auction agency can also be profitable for the investment bank. There are different attitudes to earning money at auction. The auction can pick up where live tickets are sold or advertised. Revenue can be generated by advertising or the presentation itself. While these auctions may not be realistic for commercial shopping, an investment bank may use these different strategies.
Brown, J., & Pawlowski, M. (2016). How many contracts in an auction sale. Nottingham LJ, 25, 1.
CorporateFinanceInstitute. (2019). Vickrey Auction – Overview, How It Works, Example. Retrieved 1 September 2019, from https://corporatefinanceinstitute.com/resources/knowledge/other/vickrey-auction/
Mridha, S. K., & Bhattacharyya, M. A. L. A. Y. (2017). Is dutch auction suitable for decomposable tasks in competitive crowdsourcing markets. Human Computation, 4(1), 71-77.
Therealdeal. (2019). Concierge Auctions facing accusations of fraudulent bids. Retrieved 1 September 2019, from https://therealdeal.com/2019/02/11/concierge-auctions-facing-accusations-of-fraudulent-bids/