A firm that hosts auctions for art gives the following instructions for bidding:

Question

A firm that hosts auctions for art gives the following instructions for bidding: ``To place a bid in the saleroom, raise your paddle until the Auctioneer acknowledges you. The auctioneer increases the bids by increments that usually do not exceed ten percent of the previous bid. When a sole bidder remains, the Auctioneer brings down the hammer and declares the lot sold [for the amount of the highest bid].'' Based on that description, what type of auction does the auction house run?

A: acending-price (or English) auction

B: descending- price (or dutch) auction

C: Vickrey auction

D: first price, sealed-bid auction

Explanation / Answer

A. ascending price (or English) auction

The auction house runs the ascending price (or english) auction. The English auction is the most commonly used for selling artworks and antique items. In this type of auction, The starting price is suggested by the seller and buyers are encouraged to offer higher bid accordingly. The bidding process continues till the highest bidder is found and the item is sold to the highest bidder

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