My previous article looked at a very common type of auction, the open outcry auction. In this article let’s have a quick engagement with other auctions economists study in the static, independent values framework. The last few words may sound slightly unfamiliar. ‘Static’ simply refers to the fact that we are looking at single period models as opposed to ‘dynamic’ models and the term ‘independent values’ is alluding to the idea that the agents valuation of the good being sold by the seller are independent of each other’s valuation.
The auction we should naturally look at after last week’s article is the sealed bid second price auction.