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Vehicle Auctions


In order for car dealerships to fill their used car inventory, many of them turn to large volume car auctions. At these auctions, cars are sold to the highest bidder in a traditional first price auction, where the winner bids their value and pays their bid. These dealers attempt to get these vehicles at low prices in order to sell them for a profit. For these car dealers, this provides them with crucial amounts of used cars needed to stock their inventories in order to keep their businesses running. These car auctions are rising in popularity due to the fact that more people are buying used cars, usually out of leases, since the price of new cars is continually rising.

This article details how a first price auction works and how people, in this case dealers, use these auctions in an attempt of getting the good for the price they would like. In class we discussed auctions as well as the different types of auctions and their dominant strategies. Since this is a first price auction the dominant strategy would be to bid your value, since you pay your bid. This article also describes the chaos in a high mass auction where many goods are up for bidding. For example, with many people bidding on one item, the price may increase a lot from the starting bid, which is why it is important to bid your value in order to increase your chances of winning the bid. If you bid lower than your value in this case, someone may out bid you causing you to lose the auction.


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October 2019