2) What are the benefits of Internet auctions to sellers, buyers, and market makers in an auction?
Answer: The general benefits of auctions to sellers and buyers are liquidity, price discovery, price transparency, market efficiency, lowered transaction costs, consumer aggregation, and network effects.
Sellers and buyers are connected in a global marketplace where even difficult to price items can be competitively priced based on supply and demand. Everyone in the world can see the asking and bidding prices for items, although prices can vary from auction site to auction site. Buyers are offered access to a selection of goods that would be impossible to access physically. Buyers and sellers benefit by the reduced costs of selling and purchasing goods compared to the physical marketplace. A large number of consumers who are motivated to buy are amassed in one marketplace, which is a great convenience to the seller. Network effects are achieved because the larger an auction site becomes in both the numbers of users and products, the greater all of the above benefits become and therefore the more valuable a marketplace it becomes.