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The gavel’ s edge: How auctions can trump traditional markets
Economists have long celebrated markets as an efficient way to allocate resources. Guided by Adam Smith’ s“ invisible hand”, societies have a way of bringing buyers and sellers together. Supply and demand do a sort of dance so that buyers and sellers find each other and a transaction happens at a“ market-clearing price”. But there are many sorts of markets.
In the grand market of global commerce in 2025, where prices are haggled, fixed or finessed, across borders, face-to-face, and along fibreoptic cables, auctions stand out as a curiously efficient mechanism. From the frenzied bidding rooms of in-person auctions to the raucous open-outcry trading pits of commodity exchanges and now to the burgeoning online space, auctions harness competition to allocate scarce resources, often outperforming fixed-price sales or negotiated deals in efficiency, revenue, and transparency.
The upshot is a rising tide. Auctions can function to make not just the buyer and seller better off by eliminating friction and removing deadweight losses, they can also serve to reduce opportunity costs by saving time and improving the functioning of markets by injecting transparency. In these instances, the net result of an auction mechanism are win-win outcomes.
Consider four ways auctions can improve the functioning of markets.
34 REI MAGAZINE OCTOBER 2025