Question

TOSOLVE PH 11. In two or three paragraphs, describe how a Dutch auction works and explain why it might be a good auction method to use for purchase or sale of a company's stock. nnraranhs Axnlain how shining software works

Answer 1

Answer:

Auction implies a seller paling up a product for sale and does not fix a price for it Rather he invites hid from each buyer inning to purchase the product Each buyer Is given information about he product, they can examine the product if they wish to After examination, they can bid for the product Accordingly, the seller may choose the highest/lowest bid Once Me buyer wins the hid or auction, he can get the product

Dutch auctions are the auctions where the bidding starts with a pre-fixed high price. This price continues to drop during the auction till the bidder accepts the price. It is for this reason, it is often called descending price auction

Dutch auctions are also said to be good method for purchasing or selling company stocks Following below are the reasons for the same

•As there is a pre-fixed price of the commodity, the bidding price may not fall much as there. always a Mar of losing the commodity.
• This methods beneficial for selling large number of commodities at the same time • While selling company stocks, the company opens. bid and. price generally goes up. But if Butch auctions are used to sell company stocks, the price can be controlled by the seller.

For example, some companies generate huge profits by obtaining highest prices for their stocks similarly, some companies allow lowest bob by buyer and in turn buy-pack all the stocks in Me market by paying slightly higher amount Both Me techniques have worked well for companies • Use of Dutch auctions to sell company stocks gives shareholder the benefit to choose from the range of selling prices set by Me issuer (company) The issuer selects by lowest price to buy the stock .However inhere are no shareholders willing to sell the stock on that low price, he may accept offer bum a higher price range
Butch auctions are a proven and effective technique to buy-back shares of a company.