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2015 | Book | 2. edition

Introduction Read chapter Read first chapter

Game Theory Bargaining and Auction Strategies

Practical Examples from Internet Auctions to Investment Banking

Author: Gregor Berz

Publisher: Palgrave Macmillan UK

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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About this book

This text bridges the gulf between theoretical economic principles of negotiation and auction theory and their multifaceted applications in actual practice. It is intended to be a supplement to the already existing literature, as a comprehensive collection of reports detailing experiences and results of very different negotiations and auctions.

Table of Contents

Frontmatter

Introduction

Introduction
Abstract
Auctions are becoming increasingly popular throughout the economy: In addition to the online varieties, there are auctions for the sale of everything from business-to-business contracts, real estate, business models and whole companies. All these auctions, which exemplify one special form of intensely competitive negotiation, are subject to the same economic and psychological norms. More broadly, the same or similar behavioral norms apply to any negotiations between two or more parties. The study of these norms is basically what has come to be known as game theory.
Gregor Berz

Negotiation and Auction Forms

Frontmatter
1. Bilateral Negotiations
Abstract
Have you already bought something today? If yes, did you get a good buy? Are you certain?
Gregor Berz
2. Auctions
Abstract
No doubt you are familiar with eBay. But are you also aware of quotatis. de or my-hammer.de? Individuals or even companies can announce their need for services there. Exactly as in eBay, those interested bid in an auction. However, this is a purchasing auction, that is, the winner of the auction provides a service and receives the offered price. The auctioneer1 buys this service and pays the price determined by the auction. While the auctioneer wants to get the highest price possible in a sale auction, for example, at eBay, it is exactly the opposite in a purchasing auction. The auctioneer wants to pay the lowest price possible.
Gregor Berz
3. Negotiations for Several Objects
Abstract
Have you looked at Dutch auctions at azubo.de? Then you certainly noticed that many offers are from commercial traders similar to at eBay. They tend to offer the same item several times. Such parallel auctions then also run at different times, but also in part simultaneously next to one another.
Gregor Berz

Rational Negotiation Strategies

Frontmatter
4. Basic Principles of Game and Bargaining Theory
Abstract
If you like to drive fast, then are you continually in danger on the highway of getting into a prisoner’s dilemma. This will happen even without speed limits or police checks.
Gregor Berz
5. Rational Bidding Strategies
Abstract
Imagine you are bidding at an English auction in a traditional auction house. The item is an antique jewelry case meant to be a birthday present for your wife. You have a concrete idea of how much you want to pay maximum for it, because you have already found a case somewhere else that would cost 150 euros. However, its style and condition are not quite as nice as that offered in the auction. But you will not bid more than 150 euros in any case, because it is not a special birthday with a round number.
Gregor Berz
6. Winner’s Curse in an Auction
Abstract
The classic example of common value is represented by oil fields which are auctioned to private oil companies. One of the famous cases is that of the Chinese oil company Natural Petroleum Corporation which had to pay an exorbitant price at the auction of oil drilling rights held by Venezuela in 1997. This is the background.
Gregor Berz

Auction Designs

Frontmatter
7. Selection of an Auction Form
Abstract
Why did the company for awarding the cafeteria construction project1 select a Dutch auction as negotiation form? It is not very easy for an auctioneer in individual cases to decide which of the four auction forms produces the best result. The Dutch auction essentially provides the same result as a first-price-sealed-bid auction, that is, the highest bid in the form “indifference price plus strategic margin”. On the other hand, a second-price-sealed-bid auction and an English auction are second-price auctions. They both provide the second-best indifference price as final result.
Gregor Berz
8. Disruptive Factors in Auctions
Abstract
A company got the idea of purchasing janitorial services for all of its 22 locations across Germany by calling for bids. Until then each location had normally signed contracts with local providers of janitorial services. But there are a few large service providers who promise very professional service throughout Germany. The idea was to negotiate a much better price for janitorial services at all locations by calling for bids for a one-year contract. The order was worth several million euros.
Gregor Berz

Prerequisites for Real Auctions

Frontmatter
9. The Comparability of Alternatives using the Bonus System
Abstract
There is theoretically precisely only one difference between sales and purchasing auctions.1 In a sales auction, all bidders bid for one and the same item. In a purchasing auction, however, the bidders only bid respectively for the same item. This means that the bidder items in a purchasing auction can differ more or less. It does not matter at all whether it is a question of simple merchandise, complex component supplier parts, a project order or a service, for example. Each bidder can fulfill the needs of the customer only with his individual item or individual service. The goods and/or services of the different bidders rarely correspond to the extent that a decision can be made based solely on the price.2 Consequently, the customer has to compare the bidders. The perfect method for doing this is the bonus system.
Gregor Berz
10. The Commitment of Negotiation Processes
Abstract
The role of commitment can already be seen in bilateral negotiations.
Gregor Berz
Backmatter
Metadata
Title
Game Theory Bargaining and Auction Strategies
Author
Gregor Berz
Copyright Year
2015
Publisher
Palgrave Macmillan UK
Electronic ISBN
978-1-137-47542-8
Print ISBN
978-1-349-69293-4
DOI
https://doi.org/10.1057/9781137475428

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