Flower markets are global. About three-quarters of cut-flowers purchased in the United States are imported. More than half the world’s cut flowers move through the auction system in the Netherlands. Five days a week, in a huge building 10 miles outside Amsterdam, some 2,500 buyers gather to participate in FloraHolland Aalsmeer, the largest auction of its kind in the world. Every day over 20 million flowers and plants from thousands of growers around the globe are auctioned off in the world’s largest roofed building, spread across the equivalent of 100 football fields. Flowers are grouped and auctioned off by type—long-stemmed roses, tulips, and so on. Hundreds of buyers sit in theater settings with their fingers on buttons. Nearly as many buyers bid online from remote locations. Once the flowers are presented, a clock-like instrument starts ticking off descending prices until a buyer pushes a button. The winning bidder gets to choose how many and which items to take. The clock starts again until another buyer stops it, and so on, until all flowers are sold. Auctions occur rapidly—on average a transaction takes place every 4 seconds. This is an example of a Dutch auction, which starts at a high price and works down. Dutch auctions are more common when selling multiple lots of similar, though not identical, items, such as flowers in Amsterdam, tobacco in Canada, and fish in seaports around the world. Because there is some difference among the products for sale in a given market—for example, some flower lots are in better condition than others—this is not quite perfect competition because perfectly competitive markets sell identical products. The birth of the Internet has breathed new life into auctions. Web sites such as eBay, uBid, and hundreds more hold online auctions for old maps, used computers, wine, airline tickets, antiques, military memorabilia, comic books, paperweights—you name it. The largest online site, eBay, offers over 2,000 categories in a forum that mimics a live auction. Internet auctions allow specialized sellers to reach a world of customers. A listing on eBay, for example, could reach millions of people in more than 100 countries. Now here is the Question: Which of the characteristics of the perfectly competitive market structure are found in FloraHollad Aalsmeer? List at least 3 characteristics. Would you consider this an example of a perfectly competitive industry? Why or why not? Can you provide other examples of a perfectly competitive industry?
Auction Markets
Flower markets are global. About three-quarters of cut-flowers purchased in the United States are imported. More than half the world’s cut flowers move through the auction system in the Netherlands. Five days a week, in a huge building 10 miles outside Amsterdam, some 2,500 buyers gather to participate in FloraHolland Aalsmeer, the largest auction of its kind in the world. Every day over 20 million flowers and plants from thousands of growers around the globe are auctioned off in the world’s largest roofed building, spread across the equivalent of 100 football fields. Flowers are grouped and auctioned off by type—long-stemmed roses, tulips, and so on. Hundreds of buyers sit in theater settings with their fingers on buttons. Nearly as many buyers bid online from remote locations. Once the flowers are presented, a clock-like instrument starts ticking off descending prices until a buyer pushes a button. The winning bidder gets to choose how many and which items to take. The clock starts again until another buyer stops it, and so on, until all flowers are sold. Auctions occur rapidly—on average a transaction takes place every 4 seconds.
This is an example of a Dutch auction, which starts at a high price and works down. Dutch auctions are more common when selling multiple lots of similar, though not identical, items, such as flowers in Amsterdam, tobacco in Canada, and fish in seaports around the world. Because there is some difference among the products for sale in a given market—for example, some flower lots are in better condition than others—this is not quite perfect competition because
The birth of the Internet has breathed new life into auctions. Web sites such as eBay, uBid, and hundreds more hold online auctions for old maps, used computers, wine, airline tickets, antiques, military memorabilia, comic books, paperweights—you name it. The largest online site, eBay, offers over 2,000 categories in a forum that mimics a live auction. Internet auctions allow specialized sellers to reach a world of customers. A listing on eBay, for example, could reach millions of people in more than 100 countries.
Now here is the Question: Which of the characteristics of the perfectly competitive market structure are found in FloraHollad Aalsmeer? List at least 3 characteristics. Would you consider this an example of a perfectly competitive industry? Why or why not? Can you provide other examples of a perfectly competitive industry?
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