The Economics of Auctions
Online Auctions, Ads and Reverse Auctions
Websites use auctions for ads and second-hand goods, while governments use reverse auctions to buy at the lowest price.
Auctions everywhere.
eBay
Sellers list items and buyers bid with timers and proxy bidding.
Ad auctions
Every time a page loads, advertisers bid for the slot in milliseconds.
Reverse auctions
Sellers bid to supply goods at the lowest price, used in solar and government procurement.
Risks
Very low bids may mean poor quality or unfulfilled contracts.
A solar tender
Companies bid to sell solar power at the lowest tariff.
Choosing the lowest bid without checking quality
Cheap can be costly.
Key takeaways
- eBay uses online auctions.
- Ad slots are auctioned.
- Reverse auctions seek the lowest price.
- Quality must be checked.
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