Another e-commerce rival, Amazon, relied on posted or fixed prices. When is it best to use one or the other approach? What are the relative merits of each approach for different settings? Based on what we've covered so far, we can say quite a bit about when it might be better to use auctions and when it might not. To start, there's the issue of how informed sellers are about buyer valuations: if the seller knows a lot about WTP, there's a far better chance he knows what price to directly set. On the other hand. the less information he has about the demand cunre, the more sense it makes for a seller to run an auction. As we saw before, most private value auctions generate revenue in the amount of the second highest bid, which is pretty good if the seller doesn't know much about what motivated the highest bids. A second consideration when deciding whether an auction is likely to generate more revenue than a fixed-price sale is the time it takes. In a fixed price sale, the seller gives the buyer the option to buy the item at a given price, usually immediately. If the buyer chooses to purchase the item, she knows almost immediately whether or not she will receive it. In an auction, however, the buyer likely will not learn whether she will receive the item until the very end. So auctions will be more effective when buyers are not time-constrained. Othen/vise their constraints or their impatience might make them decide to buy what they want elsewhere rather than wait to see how an auction plays out. Here's a recent advertisement highlighting that point. It's not just buyers who are concerned with timing. Sellers might care as well, but the sellers can always select an auction format to fit a schedule. Third, another important consideration is how different the buyers' WTPs are. Remember the revenue equivalence result? An auction will generate more revenue (and will be more likely to do better than a fixed-price sale) if the buyers' valuations are relatively close together, since the highest WTP and the next-highest WTP will be close together. As a result, an auction will lead the highest bidder to bid closer to his true valuation. If there are large differences in WTP across buyers, an auction may not be particularly effective in driving up prices. Fourth, we already saw that several different kinds of auctions all yield practically the same revenue if buyers' valuations are private, but that some types are more effective (for the seller) than others when the various buyers' valuations are interconnected. For example, if the buyers include experts to whom others will be looking for clues to what is more valuable than they had thought, bidding is likely to go higher than it would have othenNisewhich is all to the benefit of the seller. So if the seller knows that buyers' valuations are interdependent, he might want to use an open outcry auction