Auctions work because of information asymmetry: The seller wants to sell at the highest possible price, and the buyers want to pay as little as possible.But the seller does not know the prices the buyers are willing to pay: Setting a price that is too hight means that there will be no sale, setting a price that is too low means that there will be less profit. Each buyer knows how much he is willing to pay, but does not know the price the other buyers are willing to pay. So buyers influence each other. The theory that models these phenomena is called auction theory. It is based on game theory and microeconmics.