In: Economics
Auctions are widely used in finance, e-commerce, and in e-games. Identify three examples of auctions used in finance, e-commerce, and/or e-games. Explain the following in-depth: o The need for an auction to uncover value in the product or service. o How the type of auction used to uncover the value of the product or service is better at uncovering value than other types of auctions.
Auction refers to the buying and selling of goods and services by offering them for bidding, taking offers and going on to sell them to the highest bidder. Auctions have been used widely in banking , e-commerce, and e-games. When it comes to funding, auctions have been introduced when debtor 's goods are seized in liquidating debtor assets.
Second, in finance, auctions are introduced in the selling of highly competitive financial assistance goods. The third and last use of the auction in finance revolves around the collection of financial feature trading rules of trade. Auctions can be used in e-commerce to perform an electronically controlled e-business between bidders and auctioneers.In e-commerce, auctions occur between business to consumer (B2C), consumer to consumer (C2C), and business to business (B2B).
Last but not least, auctions are introduced in search engines, and supported ad slots are best distributed. Auction application coincides with e-games in e-commerce, based on their online website. Auctions help in achieving many objectives in auctions such as improving supply chain, eliminating middlemen, introducing dynamic pricing, increasing revenues, encouraging efficiency, reducing transaction costs.
Auctions of one type or another usually take place in the corporate control. The field has proven fruitful for various models based on auction to be developed which explains many business aspects. One thing of this is to illustrate the increases in wealth to bidders and goals, and the aggregate capital benefits, on acquisition reports.
Auctions tend to yield great target outcomes but competition in the auction (or something else) tends to ensure that bidders' gains are minimal at best. From the point of view of auction theory, this is surprising: the competitive equilibrium of an auction will always yield an estimated benefit to the winning bidder, certainly in a context of private values, and also in a common value sense.
The fact that bidders' profits are marginal indicates that the mere auction models are not capturing the process 's complexity, and other factors are likely to be at play.
It is important to note that the theory of auctions is developed in the mechanism design spirit, or concept of optimal selling schemes. The auction model takes on a degree of engagement power on the part of the vendor. There are clear "game rules" which the seller and the bidders need to follow.
One of the most fruitful areas for applying auction theory to corporate finance is In the context of corporate bankruptcy. Theoretical efficiency of auction in allocating assets to their most valued uses has led many scholars to propose auctions as a way of solving some of the questions about bankruptcy.
Unfortunately, the information issues in bankruptcy are quite severe; so any complete auction-based process model that will yield overall cost predictions must include the information cost acquired by the bidder.
There is also a fairly prevalent view that credit markets may not always allocate financing efficiently to potential buyers of bankrupt companies, so prices may be low because of a dearth of bidders.