|
What is an auction ?
An auction is a
process of buying and selling goods or services by offering
them up for bid, taking bids, and then selling the item to
the highest bidder. In economic theory, an auction may refer
to any mechanism or set of trading rules for exchange.
There are several variations on the basic auction form,
including time limits, minimum or maximum limits on bid
prices, and special rules for determining the winning
bidder(s) and sale price(s). Participants in an auction may
or may not know the identities or actions of other
participants. Depending on the auction, bidders may
participate in person or remotely through a variety of
means, including telephone and the internet. The seller
usually pays a commission to the auctioneer or auction
company based on a percentage of the final sale price.
Types of Auctions
English auction, also
known as an open ascending price auction. This type of
auction is arguably the most common form of auction in use
today. Participants bid openly against one another, with
each subsequent bid higher than the previous bid. An
auctioneer may announce prices, bidders may call out their
bids themselves (or have a proxy call out a bid on their
behalf), or bids may be submitted electronically with the
highest current bid publicly displayed. In some cases a
maximum bid might be left with the auctioneer, who may bid
on behalf of the bidder according to the bidder's
instructions. The auction ends when no participant is
willing to bid further, at which point the highest bidder
pays their bid. Alternatively, if the seller has set a
minimum sale price in advance (the 'reserve' price) and the
final bid does not reach that price the item remains unsold.
Sometimes the auctioneer sets a minimum amount by which the
next bid must exceed the current highest bid. The most
significant distinguishing factor of this auction type is
that the current highest bid is always available to
potential bidders. The English auction is commonly used for
selling goods, most prominently antiques and artwork, but
also secondhand goods and real estate. At least two bidders
are required.
Dutch auction also known as an open descending price
auction. In the traditional Dutch auction the auctioneer
begins with a high asking price which is lowered until some
participant is willing to accept the auctioneer's price. The
winning participant pays the last announced price. The Dutch
auction is named for its best known example, the Dutch tulip
auctions. ("Dutch auction" is also sometimes used to
describe online auctions where several identical goods are
sold simultaneously to an equal number of high bidders.) In
addition to cut flower sales in the Netherlands, Dutch
auctions have also been used for perishable commodities such
as fish and tobacco. In practice, however, the Dutch auction
is not widely used.
Sealed first-price auction, also known as a
first-price sealed-bid auction (FPSB). In this type of
auction all bidders simultaneously submit sealed bids so
that no bidder knows the bid of any other participant. The
highest bidder pays the price they submitted. This type of
auction is distinct from the English auction, in that
bidders can only submit one bid each. Furthermore, as
bidders cannot see the bids of other participants they
cannot adjust their own bids accordingly. This kind of bid
produces the same outcome as Dutch auction. Sealed
first-price auctions are commonly used in tendering,
particularly for government contracts and auctions for
mining leases.
Vickrey auction, also known as a sealed-bid
second-price auction. This is identical to the sealed
first-price auction except that the winning bidder pays the
second highest bid rather than their own. This is very
similar to the proxy bidding system used by eBay, where the
winner pays the second highest bid plus a bidding increment
(e.g., 10%). Although extremely important in auction theory,
in practice Vickrey auctions are rarely used.
Multi-unit auctions sell more than one identical item at the
same time, rather than having separate auctions for each.
This type can be further classified as a uniform price
auction or a discriminatory price auction.
Secondary types of auction
All-pay auction is an auction in which all bidders
must pay their bids regardless of whether they win. The
highest bidder wins the item. All-pay auctions are primarily
of academic interest, and may be used to model
lobbying/bribery (bids are political contributions) or
competitions such as a running race.
Buyout auction is an auction with a set price (the
'buyout' price) that any bidder can accept at any time
during the auction, thereby immediately ending the auction
and winning the item. If no bidder chooses to utilize the
buyout option before the end of bidding the highest bidder
wins and pays their bid. Buyout options can be either
temporary or permanent. In a temporary buyout auction the
option to buy out the auction is no longer available after
the first bid is placed. In a permanent buyout auction the
buyout option remains available throughout the entire
auction until the close of bidding. The buyout price can
either remain the same throughout the entire auction, or
vary throughout according to preset rules or simply at the
whim of the seller.
Combinatorial auction is any auction for the
simultaneous sale of more than one item where bidders can
place bids on an "all-or-nothing" basis on "packages" rather
than just individual items. That is, a bidder can specify
that he or she will pay for items A and B, but only if he or
she gets both. In combinatorial auctions determining the
winning bidder can be a complex process where even the
bidder with the highest individual bid is not guaranteed to
win.
No-reserve auction (NR), also known as an absolute
auction, is an auction in which the item for sale will be
sold regardless of price. From the seller's perspective,
advertising an auction as having no reserve price can be
desirable because it potentially attracts a greater number
of bidders due to the possibility of a bargain. If more
bidders attend the auction a higher price might ultimately
be achieved because of heightened competition from bidders.
This contrasts with a reserve auction, where the item for
sale may not be sold if the final bid is not high enough to
satisfy the seller. In practice, an auction advertised as
"absolute" or "no-reserve" may nonetheless still not sell to
the highest bidder on the day, for example, if the seller
withdraws the item from the auction or extends the auction
period indefinitely, although these practices may be
restricted by law in some jurisdictions or under the terms
of sale available from the auctioneer.
Reserve auction is an auction where the item for sale
may not be sold if the final bid is not high enough to
satisfy the seller - that is, the seller reserves the right
to accept or reject the highest bid. In these cases a set
'reserve' price known to the auctioneer, but not necessarily
to the bidders, may have been set in advance below which the
item may not be sold. The reserve price may be fixed or
discretionary - in the latter case, the decision to accept a
bid is deferred to the auctioneer, who may accept a bid that
is marginally below it. A reserve auction is safer for the
seller than a no-reserve auction as they are not required to
accept a low bid, but this could potentially result in a
lower final price than might otherwise be the case if this
means that less interest is generated in the sale.
Reverse auction is a type of auction in which the
role of the buyer and seller are reversed, with the primary
objective to drive purchase prices downward. In an ordinary
auction (also known as forward auction), buyers compete to
obtain a good or service. In a reverse auction, sellers
compete to provide a good or service by offering
progressively lower quotes until no supplier is willing to
make a lower bid.
Silent auction is a variant of an English auction where bids
are written on a sheet of paper. At the predetermined end of
the auction the highest listed bidder wins the item. This
auction is often used in charity events, with many items
auctioned simultaneously with a common finish time. The
auction is "silent" in that there is no auctioneer, the
bidders writing their bids on a bidding sheet often left on
a table near the item. Other variations of this type of
auction may include sealed bids. The highest bidder pays the
price he or she submitted.
Top-Up Auction is a variation on the all-pay auction,
primarily used for charity events. Bidders must pay the
difference between their bid and the next lowest bid,
whether they win or not. Only the winning bidder does not
have to pay the "top-up" fee, but does have to pay for the
item.
I hope you find this Shropshire Auctions website
useful for finding your local auction rooms - Have fun
at the auctions
We recommend 1and1 for hosting
 |
