Imagine you agreed to pay $10.00 for an item, but when you got to the register the actual price is far less; let’s say $5.00. How would you like that? These are the exact types of deals that are available every day in markets all over the world for those who understand auction theory.
Many auction participants fail to grasp how auction theory affects their bidding strategy and they are not served by the omission. This is especially true in auctions in newer markets with unsophisticated bidders such as digital marketing and cryptocurrencies.
Auction Theory in a Nutshell
Any time a group of people decide to convene a market to establish the price of an asset, they must agree upon a set of rules to govern the it. Usually the market operator selects an auction variant since auctions are well understood and fair to all participants since each participant is free to bid as they wish but, yet this is only true if the participants understand the dynamics of the auction they’re bidding in.
Ascending Bid Auction (English Auction)
The auctioneer starts the price low, then raises it until only one bidder remains. In the early …more ...