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<p>Auction theory is necessary when designing the rules of an auction, since a designer needs to think about the bidders' strategies to evaluate different objectives. Often practical considerations need to be taken into account but the theory acts as a guide on the tools available to satisfy each objective.<br></p>
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<p id="isPasted">An auction is a sales event wherein potential buyers place competitive bids on assets or services either in an open or closed format. Auctions are popular because buyers and sellers believe they will get a good deal buying or selling assets.</p><p>An auction is a sale in which buyers compete for an asset by placing bids.</p><p>Auctions are conducted both live and online.</p><p>In a closed auction, for example, the sale of a company, bidders are not aware of competing bids.</p><p>In an open auction, such as a livestock auction, bidders are aware of the other bids.</p><p>Examples of auctions …</p>
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<p id="isPasted">When a seller is unable to provide delivery of securities sold on the due delivery date then the broker would buy the shortfall in the securities due for delivery in an auction.</p><p>The seller will have to bear the difference between the price at which the security was sold by him and the auction price at which it is now bought on his behalf by the broker for fulfilling the delivery commitment.</p>
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<p><br>In an auction market, buyers enter competitive bids, and sellers submit competitive offers at the same time. The price at which a stock trades represents the highest price that a buyer is willing to pay and the lowest price that a seller is willing to accept. Matching bids and offers are then paired together, and the orders are executed. The New York Stock Exchange (NYSE) is an example of an auction market.</p>
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<p><br>The process involved in an auction market differs from the process in an over-the-counter (OTC) market. On the NYSE, for example, there are no direct negotiations between individual buyers and sellers, while negotiations occur in OTC trades. Most traditional auctions involve multiple potential buyers or bidders, but only a single seller, whereas auction markets for securities have multiple buyers and multiple sellers, all looking to make deals simultaneously.</p>
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