Types of Auctions This section looks at different forms of
auctions. Different types of auctions have different bidding
behaviors. How a bidder will behave in an auction depends on the
reason with which the bidder is participating in the auction in
the first place. One reason for participating in an auction is
that the bidder wishes to aquire the auctioned good for personal
consumption. One can consider a painting being auctioned and a
buyer bidding on it for personal use. In this situation, the
bidder estimates his personal consumption value of the item, and
no one other than the bidder knows what that value is. It is
probably useful to note that even the seller does not know the
values that the bidders place on the auctioned item, since if he
did he would just set the price equal to the highest valuation.
The other reason for participating in an auction is to resell
the item or use it for commercial use. In such a situation the
bidder's valuation of the auctioned item is determined by his
estimate of the fu