Auction & Vickrey

Business & Finance, Economics, Theory of Economics
Cover of the book Auction & Vickrey by Hak Choi, Hak Choi
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Author: Hak Choi ISBN: 1230002363967
Publisher: Hak Choi Publication: June 8, 2018
Imprint: Language: English
Author: Hak Choi
ISBN: 1230002363967
Publisher: Hak Choi
Publication: June 8, 2018
Imprint:
Language: English

Auction aims for highest possible price, but economists made two wrong extensions. Some thought the price can be indefinitely increased according to demand; some recommended discount to the successful bidder. The former mistake stems from the misunderstanding that the vertical line is a supply; while the latter is actually the result of too much supply (it is not auction any more). When some scarce resource is auctioned, it may bring in revenue for a government. But, if the price is set too high that leaves no profit margin to the bidders, no one will want the auctioned objects. The results are: 1. shortfall of revenue; 2. resource wastage; and 3. downfall of the government.

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Auction aims for highest possible price, but economists made two wrong extensions. Some thought the price can be indefinitely increased according to demand; some recommended discount to the successful bidder. The former mistake stems from the misunderstanding that the vertical line is a supply; while the latter is actually the result of too much supply (it is not auction any more). When some scarce resource is auctioned, it may bring in revenue for a government. But, if the price is set too high that leaves no profit margin to the bidders, no one will want the auctioned objects. The results are: 1. shortfall of revenue; 2. resource wastage; and 3. downfall of the government.

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