00:03
In an auction, potential buyers compete for a good by submitting bids.
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Adam galinsky, a social psychologist at northwestern university, compared ebay auctions in which the same good was sold.
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He found that, on average, the higher the number of bidders, the higher the sales price.
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For example, in two auctions of identical ipads, the one with the higher number of bidders bought a higher selling price.
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According to galinsky, this explains why smart sellers on ebay said absurdly low opening prices.
00:33
The lowest price that the seller will accept, such as one cent for a new ipod.
00:40
Use the concepts of consumer and producer surplus to explain galinsky's reasoning.
00:45
A, if the price is low enough, the quantity demanded will be greater than the quantity supplied.
00:50
Market forces will push the price up, and consequently, quantity demanded will fall and quantity supply will rise.
00:57
When the imbalance is eliminated, the market price determines the levels of consumer and producer surplus...