AUCTIONS
Walrasian Walmart
AUCTIONS
None of this should suggest in-person auctions are losing their relevance. As we pointed out in the second paper in this series, auctions have profound psychological impacts on participants. Some conditionsensitive goods also need to be experienced first-hand- few would buy fine art, a classic car, or high-end jewellery without a close inspection.
No matter how modern or ancient the auction, the very same problems are being solved. Wherever time, location, information asymmetry and other variables make conventional market mechanisms inefficient, auctions allow for a form of negotiation, information sharing, and price discovery in real time.
Walrasian Walmart
That said, it is useful to make an important link between auctions and the markets we engage in every day at supermarkets or while online shopping. Nineteenth-century French economist Léon Walras showed just how similar auctions are to other transactions with his famous“ Walrasian auctioneer” thought experiment.
The notional Walrasian auctioneer announces tentative prices for every good in the market- bread, milk, rugby balls, housing, labour … everything. Then all consumers share how much they would be willing to buy at those prices. And firms say how much they would be willing to supply at those prices.
No trade happens yet. The Walrasian auctioneer simply evaluates all three data sets- proposed prices, quantities demanded and quantities suppliers would supply. Based on his best calculations, the Walrasian auctioneer then calls out a new set of prices again, for every item in the market. And consumers and suppliers reevaluate how much they would buy and sell at these prices, calling out their new figures.
30 REI MAGAZINE DEC / JAN 2026