Editing Auction (section)

===By the bidders===
[[File:Vase meiping Musée Guimet 2418.jpg|thumb|An 18th century Chinese ''meiping'' porcelain vase. [[Porcelain]] has long been a staple at [[History of art auction sales|art sales]]. In 2005, a 14th-century Chinese porcelain piece was sold by [[Christie's]] for [[Pound sterling|£]]16&nbsp;million, or US[[United States dollar|$]]28&nbsp;million. It set a world auction record for any ceramic work of art.<ref>{{citation|url= https://www.nytimes.com/2005/07/13/arts/13iht-web.melik.html|title= Chinese Jar Sets Record for Asian Art|access-date= 2008-06-19|last1= Melikian|first1= Souren |author-link=Souren Melikian|date= 2005-07-26|work= The New York Times}}</ref>]]
[[Michael Katehakis|Katehakis]] and Puranam provided the first model<ref name="dynamic">{{Citation| last1 = Katehakis| first1 = Michael | last2 =  Puranam| first2 = Kartikeya S. | title = On optimal bidding in sequential procurement auctions| journal = Operations Research Letters | volume = 40| issue = 4 | pages =  244–249 | date = July 2012| doi = 10.1016/j.orl.2012.03.012}}</ref>
for the problem of optimal bidding for a firm that in each period procures items to meet a random demand by participating in a finite sequence of auctions. In this model an item valuation derives from the sale of the acquired items via their demand distribution, sale price, acquisition cost, salvage value and lost sales. They established monotonicity properties for the value function and the optimal dynamic bid policy. They also provided a model<ref name="dynamic finite">{{Citation
| last1 = Katehakis
| first1 = Michael
| last2 =  Puranam
| first2 = Kartikeya S.
| title = On bidding for a fixed number of items in a sequence of auctions
| journal = European Journal of Operational Research
| volume = 222
| issue = 1
| pages =  76–84
| date = October 2012
| doi =10.1016/j.ejor.2012.03.050
}}</ref>
for the case in which the buyer must acquire a fixed number of items either at a fixed buy-it-now price in the open market or by participating in a sequence of auctions. The objective of the buyer is to minimize their expected total cost for acquiring the fixed number of items.

During an auction, the seller might possess more comprehensive knowledge regarding the item on offer compared to the buyer, creating an information asymmetry.<ref>{{Cite journal |last=Akerlof |first=George A. |date=1970-08-01 |title=The Market for "Lemons": Quality Uncertainty and the Market Mechanism |url=https://academic.oup.com/qje/article-lookup/doi/10.2307/1879431 |journal=The Quarterly Journal of Economics |volume=84 |issue=3 |pages=488–500 |doi=10.2307/1879431|jstor=1879431 |s2cid=6738765 }}</ref> This lack of information could lead the bidder to overvalue the item and consequently pay a higher price, resulting in the [[winner's curse]].<ref>{{Cite journal |last1=Milgrom |first1=Paul R. |last2=Weber |first2=Robert J. |date=1982 |title=A Theory of Auctions and Competitive Bidding |url=https://www.jstor.org/stable/1911865 |journal=Econometrica |volume=50 |issue=5 |pages=1089–1122 |doi=10.2307/1911865 |jstor=1911865 |issn=0012-9682|hdl=10419/220807 |hdl-access=free }}</ref> Nevertheless, bidders may also choose to employ [[bid shading]] as a strategy to circumvent this predicament. [[Bid shading]] is placing a bid which is below the bidder's actual value for the item. Such a strategy risks losing the auction but has the possibility of winning at a low price. Bid shading can also be a strategy to avoid the [[winner's curse]]. In either case, the allocation of resources may be inefficient, as the product will not ultimately be acquired by the individual who values it the most. Instead, it will go to the person who either overvalues it the most or effectively employs [[bid shading]].<ref>{{Cite journal |last=Thaler |first=Richard H |date=1988-02-01 |title=Anomalies: The Winner's Curse |journal=Journal of Economic Perspectives |language=en |volume=2 |issue=1 |pages=191–202 |doi=10.1257/jep.2.1.191 |issn=0895-3309|doi-access=free }}</ref>

[[Auction cancellation hunter]]s bid minimal amounts on multiple auctions and expect them to be cancelled. If an auction is cancelled by the seller, they will claim for damages in the amount of the difference between the maximum bid at the time of the auction cancellation and the price of a replacement purchase of the offered item in the auction, when the market is in equilibrium, even if the seller has not sold any of the items, the shadow of bidding still exists. This is the self-protection instinct of the auction market. In order to make this transaction fairer.<ref>{{cite journal |last1=Zeithammer |first1=Robert |title=Research Note—Strategic Bid-Shading and Sequential Auctioning with Learning from Past Prices |journal=Management Science |date=2007 |volume=53 |issue=9 |pages=iv-1519 |doi=10.1287/mnsc.1070.0691 }}</ref> [[Auction sniping]] is the practice of placing a bid at the last moment of the auction. According to the analysis of auction data from eBay, in general, experienced bidders are more likely to snipe in auctions, and those who snipe in auctions are more likely to win.<ref>{{cite journal |last1=Gonul |first1=Fusun |last2=Leszczyc |first2=Peter |title=Snipe bidding behaviour in eBay auctions |journal=International Journal of Electronic Marketing and Retailing |date=2011 |volume=4 |pages=16–29 |doi=10.1504/IJEMR.2011.039894}}</ref> [[Jump bidding]] is an aggressive tactic of increasing every bid by high amounts. [[Calor licitantis]] is also known as "auction fever" and describes the irrational behavior of bidders at auctions. [[Suicide bidding]] is practice in reverse auctions, whereby a bidder submits a bid, which ends up in a loss for this bidder.<ref>{{cite journal |last1=Malmendier |first1=Ulrike |last2=Lee |first2=Young Han |title=The Bidder's Curse |journal=The American Economic Review |date=2011 |volume=101 |issue=2 |pages=749–787 |doi=10.1257/aer.101.2.749 |jstor=29783689 |url=https://www.zora.uzh.ch/id/eprint/235743/1/malmendier_lee_2011_the_bidder_s_curse.pdf }}</ref>

====Collusion====<!--[[Ring]] links here-->
Whenever bidders at an auction are aware of the identity of the other bidders there is a risk that they will form a "ring" or "pool" and thus manipulate the auction result, a practice known as [[collusion]] or more specially [[bid-rigging]].<ref>{{cite journal |last1=Beckmann |first1=Michael |title=Art Auctions and Bidding Rings: Empirical Evidence from German Auction Data |journal=Journal of Cultural Economics |date=May 2004 |volume=28 |issue=2 |pages=125–141 |doi=10.1023/B:JCEC.0000019483.38761.63|s2cid=154343127 }}</ref><ref>{{cite journal |last1=Marshall |first1=Robert C. |last2=Marx |first2=Leslie M. |title=Bidder collusion |journal=Journal of Economic Theory |date=March 2007 |volume=133 |issue=1 |pages=374–402 |doi=10.1016/j.jet.2005.12.004}}</ref><ref>{{cite journal |last1=Porter |first1=Robert H. |last2=Zona |first2=J. Douglas |title=Detection of Bid Rigging in Procurement Auctions |journal=Journal of Political Economy |date=1993-06-01 |volume=101 |issue=3 |pages=518–538 |doi=10.1086/261885 |s2cid=153700986 |url=https://www.journals.uchicago.edu/doi/abs/10.1086/261885 |access-date=22 May 2021 |issn=0022-3808}}</ref> By agreeing to bid only against outsiders, never against members of the "ring", competition becomes weaker, which may dramatically affect the final price level. After the end of the official auction, an unofficial auction may take place among the "ring" members. The difference in price between the two auctions could then be split among the members.  This form of a ring was used as a central plot device in the opening episode of the 1979 British television series ''The House of Caradus'', 'For Love or Money', uncovered by Helena Caradus on her return from Paris.

In the [[UK]], this auction practice is illegal.<ref>{{cite web |title=Changes in the law make auction rings easier to prosecute, but is the regulatory framework still fit for purpose? |url=https://www.artatlaw.com/blogpost/changes-in-the-law-make-auction-rings-easier-to-prosecute-but-is-the-regulatory-framework-still-fit-for-purpose |website=Art@Law |access-date=11 October 2020 |date=26 February 2014}}</ref> It jeopardizes competition on the auction and can demotivate other bidders from participating. It robs the seller of the true value of their good and reduces the auctioneer's commission.

Beyond explicit collusion, a [[tacit collusion|tacit coordination]] of bidders to keep bids low is at least theoretically possible. In case of [[spectrum auction]]s, the [[Federal Communications Commission]] (FCC) experimented with precautions restricting visibility of bids, limiting the number of bids, click-box bidding, and anonymous bidding in order to prevent bidders from [[signalling (economics)|signalling]] bidding information by embedding it into digits of the bids.<ref name=tacitfcc>{{cite journal |last1=Bajari |first1=Patrick |last2=Yeo |first2=Jungwon |title=Auction design and tacit collusion in FCC spectrum auctions |journal=Information Economics and Policy |date=1 June 2009 |volume=21 |issue=2 |pages=90–100 |doi=10.1016/j.infoecopol.2009.04.001 |url= http://www.nber.org/papers/w14441.pdf|language=en |issn=0167-6245}}</ref> Actions within the auction mechanism serve as a communication channel for collusive behavior, once no other channels are legal.