# What types of 'market mechanisms' are said to exist besides auctions?

The book Understanding Auctions states:

The term auction covers a wide range of market mechanisms that are used to exchange products and services by determining who receives an item and how much is paid for it. Although there are different auction designs, all of them share two properties. First, they are universal, that is, they can be used to sell (or buy) anything. Second, auctions are anonymous, which means that the identities of the participants do not affect the outcome of the auction.

It then goes on to describe a wide range of mechanisms that facilitate the exchange at some agreed price, all classified as types of auctions, including:

• dynamic vs sealed bid auctions
• single item vs multi item auctions
• sequential vs simulataneous auctions
• clearing vs continuous double auctions
• combinatorial auctions

Combinations of two or more of the above are also possible and still auctions. I'm struggling to think of a market mechanism that is not an auction! So my question is what other types of market mechanisms can be said to exist?! Can someone point me to a good taxonomy of "market mechanisms"?

Aside; this paper discusses "negotiation protocols" and distinguishes between:

• Voting
• Auctions
• Bargaining
• General Equilibrium Market Mechanisms
• Contract Nets

But this paper is from 1999, and the author classifies 'auctions' only the conventional type - what would be single item, monopolistic forward auctions in the first authors taxonomy. "General Equilibrium Market Mechanisms" kind of seems different but, it could also be interpreted as a multi-item, simultaneous, dynamic, clearing double auction. In fact a well known mechanism used to solve for a general competitive equilibrium is the Walrasian Auction.

Other methods or mechanisms by which goods are traded in a market economy:

1. Seller posts price.

Probably the most familiar method to most people. Examples: McDonald's posts a price of \$1 for a hamburger, an airline posts a price of \$400 for a ticket, etc. Anyone who's willing and able to pay the posted price gets the good.

Previously somewhat uncommon, but thanks to the internet most people are now familiar with this method. Example: Buyer of a ticket to tonight's game posts the price he's willing to pay on craigslist. Anyone who's willing and able to sell at the posted price gets to sell.

3. Seller and buyer both post prices.

Mr X announces he's willing to sell one Berkshire Hathaway share for \$300,000. Mr Y announces he's willing to buy one for \$300,000. The New York Stock Exchange (the intermediary) then matches them together and executes the trade.

4. Bargaining.

No prices posted. Typically, the buyer approaches the seller, the seller sizes up the buyer, offers a price, and the two then higgle and haggle till a mutually agreeable price is reached. Such bargaining could be over a US\\$0.20 bottle of water on the streets of Hanoi or a billion-dollar takeover deal on Wall Street.

I'm not sure if your book's characterization of auctions is quite right. For example, a trade on the NYSE is quite anonymous but I don't think we could consider it an auction. (Of course, one can define an auction so as to subsume all of the above mechanisms, but in that case we have wasted the word auction.)

• The NYSE would be considered a type of continuous double auction. Curious, do you have a reference for the classifications above? – spinkus Feb 12 '18 at 21:06
• The first two are just Bertrand competition. – arsmath May 22 '18 at 17:01
• "Buyer of a ticket to tonight's game posts the price he's willing to pay on craigslist. Anyone who's willing and able to sell at the posted price gets to sell." So if several people are willing to sell, they all get to? "I'm not sure if your book's characterization of auctions is quite right. For example, a trade on the NYSE is quite anonymous but I don't think we could consider it an auction." The book gives necessary conditions, not sufficient ones. – Acccumulation Nov 6 '18 at 23:25