Vivek Kaul: Seven lessons in economics from the IPL auction

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The kids who live in the building are in school. Their mothers, probably done with their chores for the morning, are resting after having a carb-heavy lunch. They’ll get busy again once their kids are back.

The Maharashtra assembly elections are over. The results have been declared. The celebrations have been made: No loudspeakers are on.

And Bob Dylan is singingAbandoned Love,a song that I hadn’t heard before today. It’s a quiet afternoon. I have just finished having breakfast and am thinking about the auction for the Indian Premier League (IPL) twenty-twenty (T20) cricket tournament that happened a few days ago.

On any other day, I would probably have had my version of a carb-heavy lunch by now and would have been taking an afternoon nap. But given the lack of any responsibilities and the usual lack of interest in most things on most days, I woke up at only around 12.30 pm today. And for some reason, I woke up thinking about the IPL auction.

The mind works in funny ways. Now, before I start talking about the IPL auction, it’s important to understand the meaning of two terms: market and auction. At its most basic level, a market is a place where buyers and sellers meet to exchange goods, services, commodities and currencies.

Further, it need not be a physical space, it can be virtual as well, like stock markets are these days. Most auctions involve a public sale of goods or services or a skill, and the person or the firm bidding the highest price ends up buying the thing being sold. The thing being auctioned can be a piece of land or telecom spectrum or a sportsperson agreeing to play for a team for a certain