Auctioning
There are various types of auctioning processes that are always used by businesses and governments to acquire goods and services. Auctioning, therefore, plays a significant role in the economics, as they are one of the ways in which financial assets and commodities are allocated to various firms. (Feldman & Mehra, 1993). Various actioning methods always have got their own advantages and shortcomings in uncovering the value of a commodity. The first two auctioning types that this paper analyses are the English and the Dutch auctions. In English auctions, goods are offered to people at the highest price. The commodities are always given at a particular price, and different bids are made. The highest bidder is, therefore, the one who is given the product. On the other end, it seems to be a little similar to Dutch auction; however, in this case, the asking price is always set higher than the normal and lowered until it reaches a point where the price is accepted. In comparing these two, therefore, the Dutch auction significantly benefits the seller than in the English auction in cases where there is a varying consensus of knowledge on the actual value of the property. In an English auction, the bidders always have got a knowledge of the bids made by the other buyers. However, when it comes to the Dutch auction, the buyers act without the knowledge of the other bids made. Therefore, this points out that the English auctioning involves emotions as the buyers compete with their bids. It is also worth noting that both kinds of auctioning are time-consuming. One disadvantage in the English auction – which concern is that the sellers can alter the price by raising the bid as a way of influencing the other bidders to bid higher; thus, they eventually obtain the goods at a specific value beyond the actual price of a commodity. (Adam et al., 2011). On the other hand, the Dutch auction is seemingly economically inefficient and also not useful in uncovering the real value of the commodity.
The second types of auctions are the sealed bid first price action and the Vickery auction. These two types of auction always take a similar course since they all are sealed bid and, thus, bidders have no knowledge of the other bids. However, the line is drawn on how the commodity value is determined and handed to the bidder. The first-price sealed-bid auction is characterized by bidders submitting sealed bids at once, and the highest bidder acquires the product. Concurrently, the Vickery auction the process of submitting sealed envelopes is the same; however, the one with the highest bid will receive the commodity but at the second-highest bid price. The advantage of both processes is that the other bidders are unaware of the other bids. Their benefit is also that the bidders can only make a single bid. However, this can also be a disadvantage as it can be seen as unfair. One advantage of Vickery is that it is considered a rational and truthful process compared to the first-price sealed bid auction. (Sayman & Akcay, 2020). However, in most cases, the two types of bids do not always determine the actual value of a product.
Demand for goods and the pricing strategies are often two factors that are seemingly dependent on each other. Surge pricing and congestion pricing are commonly used by various companies to determine the prices – in line with the existing demand for the products are services. Surge pricing is a method whereby a company hikes the price of their services and goods when demand rises. An example of a company that uses this strategy is Lyft and Uber. Concurrently, there is the congestion pricing – also known as value pricing, is whereby a company increases the price of a commodity or service as a way of regulating the demand. This is majorly used in highway toll stations as a way of reducing congestion; or rather traffic. These two pricing strategies might seem to look similar – in terms of definition; however, the end goal is always different. The main difference is that; in the surge pricing is always aimed at increasing the supply to the customers. On the other end, congestion pricing is always aimed at reducing demand while maintaining the supply level. Thus, congestion pricing doesn’t increase the supply for that commodity. The surge pricing has often helped Uber to operate effectively and bring value to most of its customers. “Despite its merits for the platform, surge pricing has been criticized because of concerns for the welfare of providers and consumers.” (Gachon, 2017). On the other end, congestion pricing always reduces demand but also improving the quality of the services and commodity provided. Lastly, the similarity between the Surge and Congestion pricing is that price increases vary at different times of the day or even year.
In finance, auctioning is always used in making purchases if properties for business purposes. They are also used when selling companies to ensure that they fetch the highest price possible. In finance, therefore, the types of auctions used are English auction, Dutch auction, and the first-prize sealed-bid auction. E-commerce and e-Games also involve various bidding methods. An example of an e-commerce website that uses auctioning is eBay. Thus, when it comes to e-commerce and e-games, the three methods, such as the Vickery auctioning, Penny auction, and the reverse auction.
In most cases, people always perceive the value of something to be the performance of that commodity. However, the price of a product also determines its cost. People tend to pay a higher amount of money when the appearance of the good is appealing. Thus, this also defines the value of a product. Auctioning is often considered to be one way that can uncover the value of the product or service. This is because the buyer’s perception of quality will determine the amount paid, thus its value. The auctioning method that seems to be useful in uncovering quality is the a product or service. This is because the highest bidder always takes the day and possess that which is being auctioned. The auctioning process always involves numerous people who have different perceptions of the good or service. Thus, this factor increases the valuation of the product. The highest bidder will get good because at that particular price is where he/she values the product. The competition that comes with this type of auction also ensures the value of the product or service is kept at a maximum. Thus, the optimum price or bid will uncover the real value of the product – which might be high above the standard value. Consequently, this makes English auctioning a better method than the other such as Vickery or sealed-bid first-price auctions.
Auctioning hashas often been used by varioush private and publiccompanies andforo profit, and non-profit making organizations. The non-profit organizations often gains a number of advantages from auctioning as a way of generating revenue. One of the advantages is that it helps in the identification of new donors. In most cases, these organizations are often charity organizations that require funding from other people. Through auctioning, they will always reach a significant number of people as actions are done in public. Thus, this also presents them with a chance to familiarize themselves with more people and share with them their mission and vision. This would also attract many people to fund them, thus, also enhance its longevity. Again, this would ensure that they maintain the connection they have with their existing donors – through auction events. Therefore, this will also inspire them to contribute more to the missions of the organization. Additionally, auctioning will also help increase their revenue. This is quite straight since the organizations often sell the commodities at a minimum price to raise more revenue that can help the organization. However, this type of revenue generation also has some disadvantages tied to it. One of them its that it is quite costly and time-consuming to organize an auctioning event. Most of the non-profit organizations are simple organizations, and thus, it is quite challenging to put up an auctioning event that will have an impact. Failure of better planning will see the organization fail to get enough revenue to sustain it. Since venue and participants matter in auctioning, not-for-profit organizations might fail to get all these things right.
For-profit organizations sometimes desire to get more revenue from the sales that they make. The use of auctioning can serve as a better way for companies to increase revenue and also unearth the value for commodities. In most of the bidding processes, the seller always stands to benefit the most. Companies can capitalize on this when even selling some of their assets. They might obtain more, thus, profits. This can also help to define the value of the goods that they deal in, or rather, that which they auction. Concurrently, companies can also apply the use of dynamic pricing. This is a strategy that involves the surge pricing where prices fluctuate due to the various nature or factors in the market. This can be based on groups whereby; different prices are charged for different people. This can help increase revenue as the supply will also be increased. This strategy is also based on time. Under the price for the goods and services will always differ depending on various times of the day, week, months, and a year. This can help the company to effectively maintain their balance in revenue collection even in the low peak periods. It would also help to keep the demand and the supply at certain level which ensures consistency in performance and value.
Works Cited
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