Benefits Of Penny Auction On The Example.
Penny auction is based on the fact that the auction lot (good or service) is exposed at the lowest price (most often it is 1 dollar). Bidders are betting with fixed pitch (from 10 cents to 25 cents). It will be charged a certain, predetermined fee for each made bet from participant of penny auction (from 6 to 7.5 dollars depending on the purchased package of bets). Trading hours for a particular lot is limited and is given at startup (usually 24 hours). At the same time after each bet the time of the end of the auction is extended for a certain amount. The winner of the auction becomes the party whose bet will be the last.
Very often we can meet another name in the definition of the Scandinavian auction: Lowest unique bid auction. In fact, it is a separate type of auction, which operates on a principle of a usual auction, but with one difference: the winner of the lot is the one participant who at the close of trading will offer not the maximum but minimum unique price. Such auctions are sometimes called “blind” because the participants make their bids, not knowing how many money the others have set.
At first glance it might seem that the organizers of penny auctions sell goods at a loss. It is not right. We will show this in the following example.
Suppose, on auction Smartphone Nokia N95 is put up, which supports a gaming platform N-Gage. The market value of this Smartphone is 17,200 conventional units.
The initial cost of the lot is 1 c.u. Participants make bids. The cost of one bet – is 7 c.u. Each bid increases the cost of the lot at 25 cents.
So that the organizers pay back this Smartphone, the participants need to make bets in the amount of at least 17,200 c.u. (market value of the N-Gage compatible device), i.e. 2458 bets. Since each bid increases the price of Nokia N95 only on 25 cents, after the 2,458 th bid the price of Nokia Smartphone will be only 615.5 c.u. 2,458 * 0.25 + 1 = 615.5).
Thus, in this example at the price of the lot at 615.5 c.u. organizers do not come off a loser. And if the auction goes on, all other bets are in net profit to the organizers.
Now consider the same example from the position of a party: So, during bidding it was done in 2458 bets, one participant made 100 bids, and the last was his one. At the same time he has spent 700 c.u. (100 bets for 7 c.u.) As we see from the previous example, the auction price of the lot by this time had reached 615.5 c.u. As a result, he will pay for only 1315.5 c.u. (615.5 is an auction price plus 700 c.u. on bets) for the opportunity to play excellent games N-Gage. The market value of the goods, as we remember, 17,200 c.u. Savings are easy to calculate.
Perhaps you will have a question: how many bids need to do to become a winner? Of course, it all depends on the specific auction, put up lot and the number of participants, but the minimum number of bids needed to win – is just one…
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And remember that our world is the world of modern Internet technologies. It wouldn’t be smart not to make use of the Internet network to find anything to get it at the best prices available on the market. Search engines, social networks, blogs and forums – all this will assist you to solve many issues.
