ECON 1101 1st Edition Lecture 2 Outline of Last Lecture I Intro to Economics Outline of Current Lecture II Auctions A Single sided vs Double sided B Types of bidding C Adding Competition D Electricity Auctions Current Lecture Auctions An important form of market exchanges treasury bills cell phone spectra etc that happen every day and are relatively easy Single sided vs Double sided Auctions single and double refer to the party that bids Single sided o Only buyers OR only sellers bid o Only one side can raise the price o When sellers are bidding to sell the buyers something prices drop o When buyers are bidding to buy the product or service prices increase Double sided o Both buyer and seller are bidding o Sellers lower the price buyers raise the price during the auction Types of Auctions There are many types of auctions but for now just worry about these two Sealed Bid done silently bids are placed in an envelope at the end of auction the envelopes are opened and the highest bidder wins cannot change bid during the auction Open Outcry normally an auctioneer present bidders allowed to change bid hear others bids typical auction you see in the movies Reserve Price the price limit you set at an auction sellers won t sell for less than this buyers won t buy for more than this These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Adding Competition When there is only one seller it is called a monopoly Sell prices increase In competitive markets demand drives the prices down That is how competition works in a nutshell Example Two people open separate ice cream shops next to each other Store A sells Ice cream cones for 1 00 and Store B sells ice cream cones for 0 75 When more people go to Store B Store A reduces his her prices down to 0 50 to attract buyers and beat out the competition Collusion secret or illegal conspiracy especially in order to cheat or deceive others Electricity Auctions I II III IV ISO receives bid from supplier Picks PRICE QUANTITY and WHO gets to sell P Q Who In a Uniform Price Auction everyone gets paid the same as long as they make the bid a Sellers bid closer to cost of production in these types of auctions b Example on Moodle Slides Week 1 Lecture 1 Assume suppliers can only sell ONE unit of electricity MAIN IDEA PRICE IS HIGH WHEN DEMAND IS HIGH
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