Auction Theory is a branch of economics that studies how different auction formats affect bidding behavior and outcomes. It analyzes various types of auctions, such as English auctions, Dutch auctions, and sealed-bid auctions, to understand how bidders strategize based on the rules and structure of the auction. The theory also explores concepts like winner's curse, where the winning bidder may overpay due to competition, and revenue equivalence, which suggests that different auction formats can yield similar expected revenues under certain conditions. Overall, Auction Theory helps in designing efficient auctions and predicting bidder behavior.