Auctions and Fashion

Auctions glossary

Auctions and Fashion

Glossary

Two of the basic terms participants must understand are common value and private value.
Common value refers to worth determined by external factors, such as how much the item get be resold for in another marketplace.
Private value deals with worth determined by internal factors, such as how badly a particular bidder wants to own that item.
Two other terms related to bidder behavior are risk averse and risk neutral.
Risk averse bidders are willing to increase their bids beyond the value they have placed on the item in order to win the auction.
Risk neutral bidders will only bid up to that value and then stop.
Generally these two types of bidders will behave differently because of their two different perceptions of risk.
Auctions can also be first-price or second-price.
Second-price auctions , like uniform auctions, require winners to pay the highest losing bid in order to purchase the item, instead of their actual bid.
First-price auction , however, require the winning bidder to pay the exact amount that the bidder has bid for a single item.
Additionally, auctions can be considered single-shot or repeated.
One-shot auctions take place during a single, specific auction period. When that period ends, the auction is over.
Repeated auctions , the bidding can continue through multiple trading periods and can have complex rules.