Learning about auctions on and offline can be fun
and informative. In this article you'll discover the differences
between various types of auctions.
English auction: This is what most people think of as an auction.
Participants bid openly against one another, with each bid being higher
than the previous bid. The auction ends when no participant is willing
to bid further, or when a pre-determined "buy-out" price is reached, at
which point the highest bidder pays the price. The seller may set a
'reserve' price and if the auctioneer fails to raise a bid higher than
this reserve the sale may not go ahead.
Dutch 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, or a predetermined minimum
price is reached. That participant pays the last announced price. This
type of auction is convenient when it is important to auction goods
quickly, since a sale never requires more than one bid.
The Dutch auction is named for its best known example, the Dutch tulip
auctions; in the Netherlands this type of auction is actually known as
a "Chinese auction". "Dutch auction" is also sometimes used to describe
online auctions where several identical goods are sold simultaneously
to an equal number of high bidders. Economists call the latter auction
a multi-unit English ascending auction.
Sealed High-Bid Auction: In this type of auction all bidders
simultaneously submit bids so that no bidder knows the bid of any other
participant. The highest bidder pays the price they submitted.
Vickrey auction: Also known as the sealed second-price auction. This is
identical to the sealed high-bid auction, except the winning bidder
pays the second highest bid rather than their own.
Silent auction: This is a sealed variant often used in charity events,
but involving the simultaneous sale of multiple items. Participants
submit bids normally on paper, near the item. They may or may not know
how many other people are bidding or what their bids are. The highest
bidder pays the price they submitted.
Procurement auction: This kind of auction reverses the roles of seller
and buyer. The buyer puts out an RFQ for a given commodity and
providers offer progressively lower prices in hopes of getting the
business. At the end of the auction, the lowest bid wins.
Digital art auction: In this indefinitely long auction, designed for
unreleased works that are trivially reproducible at zero cost
(recordings, software, drug formulae), bidders openly submit their
maximum bids. The seller may review the bids and close with a price of
their choosing at any time. The successful bidders that pay this price
are those whose bid meets or exceeds it.
Open outcry auction: This type of auction can refer to any auction
where the auction is conducted orally for people to hear typically used
in stock exchanges and commodity exchanges, where trading occurs on a
trading floor and traders may enter verbal bids and offers
simultaneously. This type of auction is being replaced by electronic
trading platforms.
Unique bid auction: In this type of auction users post blind bids and
are given a range of prices they can place a bid in, often a capped
limit. The highest, or lowest, unique bid wins. For instance an auction
is given a maximum bid of 10. If the top five bids are 10, 10, 9, 8, 8
then 9 would be the winner being the highest unique bid. This is a
popular online type of auction.
Buy-out auction: This auction has a predetermined buy-out price in
which the bidder can end the auction by accepting the buy-out price.
The buy-out price is set by the seller. The bidder can choose to bid or
use the buy-out option. If no bidder chooses to utilize the buy-out
option, the auction ends with the highest bidder winning the auction.
You can often find this type of auction on eBay.
Be sure you understand the type of auction you are participating in
before it starts. Sometimes mistakes made at an auction can smart and
be costly if you don't know what you are doing.
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