Describe the operation of a typical auction.

In an auction, a seller offers an item or items for sale, but does not establish a price. Potential buyers are given information about the item or some opportunity to examine it; they then offer bids, which are the prices they are willing to pay for the item. The potential buyers, or bidders, each have developed private valuations, or amounts they are willing to pay for the item. The whole auction process is managed by an auctioneer. In some auctions, people employed by the seller or the auctioneer can make bids on behalf of the seller. These people are called shill bidders. Shill bidders can artificially inflate the price of an item and may be prohibited from bidding by the rules of a particular auction.