Auction Theory In The Used Car Market Mmu Assignment

2913 words - 12 pages

Table of Contents
Introduction 2
Key concepts 3
English auction 3
Dutch auction 3
Sealed bid first-price auction 3
Sealed bid second-price auction 3
Values 3
Independent private 3
Pure common 3
Affiliated model 3
The market for used cars 4
Revenue Equivalence Theorem 5
Risk aversion 5
Affiliation and common components 5
The winners curse 6
Reserve prices 6
Number of bidders 6
Conclusion 7
Appendix A: Entry restrictions 8
References 9
This report seeks to analyse the application of auction theory principles to the design of sales of used cars. The concept of the Revenue Equivalence Theorem (RET) will be explored to determine how profit maximisation can be achieved by sellers of used cars.
In their most simple form, auctions are allocative mechanisms often most beneficial in situations where the value of items is unknown, can vary and/or does not have a determinable market value (Feldman & Mehra, 1993). This report will first address key concepts to distinguish aspects by which auctions can be classified, before going on to explore how conditions within used car auction design can maximise profitability, and concluding with findings, limitations and developments of the research.
Key concepts
The four primary types of auction are classified by their differing rules, and consequential bidding strategies of bidders. The general principles of each design are briefly discussed below.
English auction
Arguably the most prevalent form, the English auction is also referred to as an ascending auction. The sale of goods using this mechanism is conducted in real time, with bidders making successively higher bids, usually in small increments. The item is won by the highest bidder, who will pay the highest bid.
Dutch auction
The Dutch auction, used less frequently in practice, is often referred to as a descending auction. Similarly to English auctions, the bidding takes place in real time and is observed by all. Auctioneers begin at a high price, which is gradually lowered until a bidder indicates interest. The item is sold to the winning bidder at the highest bid.
Sealed bid first-price auction
Unlike English and Dutch auction designs, sealed bid formats are unobserved by others- resulting in imperfect information- and cannot be adjusted. The bidder with the highest bid pays their price and wins the item.
Sealed bid second-price auction
Second-price auctions follow the same principles as sealed bid first-price auctions, but instead allows the highest bidder to win the item while paying the second highest price.
A key feature of auctions is the presence of uncertain and asymmetric information. The strategies of bidders are determined by the values placed on the item in question, which can be categorised by independent private values and pure common values.
Independent private
The independent-private model refers to the valuations individuals place on items according to individual preferences. These values are independent of other’s values....

Other Essays On Auction Theory in the Used Car Market - MMU - Assignment

One of the cornerstones of marketing theory is the notion that marketers can “segment” the market - University of Western - Essay

1575 words - 7 pages what a market segment is), but also some evidence that you can apply that theory (e.g., by explaining how the theory is useful, and by giving good examples). In some respects, answering the application part of the question is more important. Most people can explain a simple theory like segmentation, but real knowledge is demonstrated when someone can apply that knowledge, and give good examples. 3. When reading the suggested answer below, note

Chapter 2 The Beginnings of Personality Theory - CSUCI PSY 317 - Homework Assignment

460 words - 2 pages Chapter 2 The Beginnings of Personality Theory Sigmund Freud · Grew up in the sophisticated, but anti-Semitic, city of Vienna · European culture and sexual repression · Was the indulged family favorite · Attended medical school at the University of Vienna · Performed research in the laboratories of Ernst Brücke and other distinguished professors · Neuroanatomist, neurophysiologist Hysteria and Hypnosis · The brilliant Charcot’s neurological

Cinematic Techniques Used in "The Descent" - Portland Community College - Essay

812 words - 4 pages Emily Malech - Week 5 - Walters - ENG 196 Close Reading: The Descent SOUND In most horror films, low pitched sound is used to build up intensity which tells the audience when something bad is about to occur. In other words, we know when something scary is about to happen because the music builds up and gets louder before going completely silent. The Descent uses these techniques commonly throughout the film; the tension and jolt is used when the

gender inequality in the workplace - class - assignment

1593 words - 7 pages wil assignment 1 FOURTH YEAR ENGLISH METHODOLOGY SURNAME & INITIALS: TWALA NP STUDENT NUMBER: 216063225 LECTURER: DR ROBINSON DUE DATE: 25 APRIL 2019 You will be required to write a report that should not exceed two pages on how the topic of grammar is presented in class. Note that this report should not be only descriptive; you are required to critique how the class is presented. In what way could it be improved? What elements of the class made

African slavery in the Caribbean - History - Assignment

1108 words - 5 pages The British and French Caribbean – Patrick Wilson-Boyd From 1662 to 1833, slavery was a huge economic growth for the British and French Caribbean. Throughout this period, more and more Africans were being brought all around the British Empire, and by the early 18th century 80% of the Caribbean population was black. The slaves were used on plantations throughout the Caribbean, consequently, the plantation economy relied on the labour of slaves

Products, Services And Prices In The Free Market

1210 words - 5 pages & Brue, 2004, chap. 25, p. 461). Advertising is a powerful tool used by corporations in a monopolistically competitive market. One of the most powerful advertising tools is developing a strong brand name as McDonald's has by its presence in over 119 countries. (McDonald's, 2008) A cursory review of the MarketLine database has determined that McDonald's will do well to improve their revenue by using more tactics modeled in a monopolistically

eighth grade word part formative test questions suffix and prefix are all used in this test - English Class at douglass High School - Assignment

596 words - 3 pages that a corposant is a holy A) body B) word C) prayer D) day 17. Knowing the suffix –ette helps the reader to understand that the word farmerette means a A) great farmer B) female farmer C) male farmer D) child farmer 18. Knowing the prefix im- helps the reader to understand that someone who is immature is A) very mature B) always mature C) not mature D) rarely mature 19. Knowing the root dict helps the reader to understand that diction is the style in which one A) reads B) hears C) dances D) speaks 20. Knowing the root nav helps the reader to understand that a navigator is one who is capable of steering a A) car B) ship C) plane D) train

literary devices used "In the inner city" and in "the city's love" - ap lit - timed essay

563 words - 3 pages these relationships. Despite both speakers having different takes on urban/city life, imagery is utilized in both poems to portray these differences. In the poem titled “In the inner city”, the author used phrases like “silent nights” and “the houses straight as dead men” to reveal how lifeless life in the city was. Using words like “silent” and “dead” allows the reader to create an image of how dull and boring city life was for the speaker. In

This is an assignment about the vocabulary terms in economics chapter 11 - Economy 101 - assignment

1147 words - 5 pages invests the money it receives in stock and bonds issued by other companies. The owners of mutual funds receive dividends earned from the mutual fund’s investments. Net Asset Value (NAV): The net value of the mutual fund divided by the number of shares issued by the mutual fund company is the market value of a mutual fund share. Pension: A regular payment (usually monthly) paid to a person who has worked a certain number of years, reached a certain

Listening & Reading: Two Tasks Used In Teaching To Develop Discourse Skills In The Classroom

2790 words - 12 pages sentence or the paragraph.- Ask the students to identify certain synonyms and antonyms.- Make note of the conjunctions used in the article.- Write down some of the difficult grammatical sentences and discuss with theteacher.- Every group Make use of examples about declarative, interrogative andimperative forms- Exercise: Ask the students to work in groups of 3 or 4 and write a short storyabout another person who was feeling depressed.(Celce-Murcia

Freudian Theory in Lord of the Flies - English 30S - Essay

1412 words - 6 pages Freudian Theory in Lord of the Flies In the story, Lord of the Flies, the exemplification of Freud's Theory of the Id, Ego and Superego looks at different characters throughout the story. Freud primarily agrees with the idea that there are two energies that derive human behaviour. These two energies are the pleasure principle and aggression. The human mind is comprised of the conscious, preconscious and the unconscious. Within these realms of

Similar Papers

Assignment On How Math Can Be Used In The Occupation Of Nursing College Algebra Research Paper

603 words - 3 pages Algebra in Nursing Math, although it maybe unliked by many students, is essentially to daily life. Math is apart of just about everything we do. It is used to create the cars we come to school in and the toothpaste we use to brush our teeth. It is just as essential to nursing as it is to everyday life. One of the skills required to be a nurse is solving basic linear equations for dimensional analysis. Dimensional analysis is the process of

Role Of The Budget For Nairobi African Market, A Local Business In Moline Illinois Liberty University Busi730 Assignment

1745 words - 7 pages requests without removing finances and resources from another department (Zhong et al., 2018). Strategizing takes practice as one strategy might not work throughout the entire company. Nairobi African Market used a targeted approach, which specifically went after one group in a community, also used budgeting to analyze details of each month and the consumer habits. What we learned from the strategy is that consumers will always expect incentives, and

Existence Of God Used Within The Class Of The Meaning Of Faith Regis Assignment

467 words - 2 pages which support my own belief in God are very minimal however I do believe he is here with us. There have been many instances in my life where loved ones should have died however I believe due to the power of god they are still here with me. One of my close friends in high school had gotten in a very bad car accident. He went straight into a telephone pole going 70 mph, he was in a coma for 4 months. Everyone believed he wasn’t going to come

A Letter To Teft Of The Book Bless The Beasts And The Children Used For Ideas For Similar Assignment

331 words - 2 pages admission. In the middle of your Exeter interview, you began to inform the headmaster of your illustrious car theft career. It was said about you that "as far was you were concerned, Exeter could shove itself up its own anal orifice." Not all of your behavior was rebelling towards your station in life in my mind. Some of your actions were to protect your friends, the Bedwetters. In some instances, it was heroic. One example was after you