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An auction is the process of buying and selling goods by offering them up for bid, taking bids, and then selling the item to the winning bidder. In economic theory, an auction is a method for determining the value of a commodity that has an undetermined or variable price. Auction is a public sale.

Auctioning can be traced as far back as 500 B.C.^[1] Auctions can be with reserve or minimum, or without minimums, or absolute or no reserve. In reserve auctions, there is a minimum bid or reserve price; if the bidding does not reach the minimum, there is no sale (but the person who puts the item up for auction may still owe a fee to the auctioneer or auction company). In absolute or no reserve auctions, the sale is guaranteed, with only the price left to be determined. In the context of auctions, a bid is an offered price.

Contents 1 Types of auctions 1.1 Auctions: Characterization 1.2 Other auction terminology 2 Common uses for auctions 3 See also 4 Further reading 5 External links

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Auctions can differ according to their nature (supply: when m sellers offer a good that a buyer requests; demand: when n buyers bid for a good being sold; or double: when n buyers bid to buy goods from m sellers), by the bidding procedure (open: dynamic price formation process; or closed: buyers and/or sellers submit sealed bids), and by the price formation mechanism (first price, second price, ...). It may also have or not have a reservation price, which is the least/maximum acceptable price for which a good may be sold/bought.

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• Silent auction: This is often a variant of an English auction, where bids are written on a sheet of paper, and at the predetermined end of the auction, the highest listed bidder wins the prize. This auction variant is often used in charity events, and many items may be auctioned simultaneously. Participants submit bids normally on paper, near the item. Other variations of this type of auction may include sealed bids. The highest bidder pays the price he or she submitted.

• Digital art auction: In this indefinitely long auction, designed for unreleased works that are trivially reproducible at zero cost (recordings, software, drug formulas), bidders openly submit their maximum bids (which may be adjusted or withdrawn at any time). 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, and these are the only bidders who receive a copy of the item.

• Open outcry auction: This type of auction can refer to any auction where the auction is conducted orally for people to hear. This type of auction also refers to what is used in stock exchanges and commodity exchanges, where trading occurs on a trading floor and traders may enter verbal bids and offers simultaneously. Transactions may take place simultaneously at different places in the trading pit or ring. 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 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.

• Combinatorial auction: A combinatorial auction is an auction in which bidders can place bids on combinations of items, or “packages,” rather than just individual items.

• Absolute auction, also known as an Unreserved Auction, No-reserve Auction or Auction Without Reserve, is an auction with no minimum bid amount, no set starting bid, no seller confirmation of the high bid price, and no buybacks of the property being offered by the seller of any agents of the seller. The highest bidder will purchase the property no matter the high bid price. This type of auction is designed to attract the maximum participation from the buying public as the seller has committed to convey their property to the highest bidder without limitation. It does offer buyers excellent opportunities from time to time, however. A 2003 Virginia statute defines an absolute auction as "an auction where at the time of the auction sale the real or personal property to be sold will pass to the highest bidder regardless of the amount of the highest and last bid."

In terms of security/privacy, there are two main types of auctions:

• In a private auction the identities of the bidders are hidden, so anyone that buys the item can remain anonymous. This is normally done for either security reasons such as rare gems or art, or to avoid embarrassment if the item is more risque.

• In a public auction, the bidders' identities are not hidden and anyone is welcome to attend the auction.

In terms of auctioneers and auction items, we can differentiate three types of auctions:

• exchange auction — also known as commodity auctions or exchange-commodity auctions, are the most closed to the new participants. The participants include a number of core professional buyers, who monitor each other to ensure that no one is 'cheating' on the community
• sale auction — for art and one-of-a-kind items
• dealer auction — for collectibles, cars or machinery

If more than one identical item is sold, there are two possible generalizations of the second-price auction. In a uniform-price auction, all of the winning bidders pay the price submitted by the highest non-winning bidder. Bidders will not typically bid their true value in a uniform-price auction with multiple units. In a Vickrey (or second-price sealed-bid) auction, the pricing rule is more complicated, but preserves the property that bidders will bid their true valuation. It is also possible to auction each identical item individually. Once each item has been priced, the winning bidder is entitled to buy the remaining goods at the same price. Items the winning bidder opts not to purchase are auctioned again. This system creates a tension between the desire to hold back on bidding since later items will almost certainly be cheaper, and the chance that by losing the first round of bidding all possibility of purchasing will be lost.

Work in the theory of auctions contributed to Vickrey's 1996 Bank of Sweden Prize.

• Reverse auction: 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 (or also known as forward auction), buyers compete to obtain a good or service. In a reverse auction, sellers compete to obtain business.

Auctions are publicly and privately seen in several contexts and almost anything can be sold at auction. Some typical auction arenas include the following:

• the antique business, where besides being an opportunity for trade they also serve as social occasions and entertainment
• in the sale of collectibles such as stamps, coins, classic cars, fine art, and luxury real estate
• the wine auction business, where serious collectors can gain access to rare bottles and mature vintages, not typically available through retail channels
• in the sale of all types of real property including residential and commercial real estate, farms, vacant lots and land
  

  

  Cattle auction, Walcha, NSW
• for the sale of consumer second-hand goods of all kinds, particularly house clearances and online auctions.
• sale of industrial machinery, both surplus or through insolvency. *in commodities auctions, like the fish wholesale auctions
• in livestock auctions where sheep, cattle, pigs and other livestock are sold
• in wool auctions where international agents purchase lots of wool
• in thoroughbred horseracing, where yearling horses are commonly auctioned off; and
• in legal contexts where forced auctions occur, as when one's farm or house is sold at auction on the courthouse steps.

Although less publicly visible, the most economically important auctions are the commodities auctions in which the bidders are businesses even up to corporation level. Examples of this type of auction include:

• sales of businesses
• spectrum auctions, in which companies purchase licenses to use portions of the electromagnetic spectrum for communications (e.g., mobile phone networks)
• timber auctions, in which companies purchase licenses to log on government land
• electricity auctions, in which large-scale generators and consumers of electricity bid on generating contracts
• environmental auctions, in which companies bid for licenses to avoid being required to decrease their environmental impact
• debt auctions, in which governments sell debt instruments, such as bonds, to investors. The auction is usually sealed and the uniform price paid by the investors is typically the best non-winning bid. In most cases, investors can also place so called non-competitive bids, which indicates an interest to purchase the debt instrument at the resulting price, whatever it may be
• auto auctions, in which car dealers purchase used vehicles to retail to the public.

• Types of auction:
  • Art sale
  • Car dealer auctions
  • Chinese auction
  • Estate sale
  • Vickrey auction
  • Reverse auction
  • Philatelic auction
• Famous Auction houses:
  • Christies
  • Bonhams
  • Bonham's and Butterfields
  • Dorotheum
  • Lyon & Turnbull
  • Sotheby's
  • Phillips de Pury & Company
• Other topics:
  • Tenders
  • Auction School
  • Auction Theory
  • Auction Chant
  • Auction Network
  • Dollar auction
  • Game theory
  • Online auction tools
  • Online auction business model

• Klemperer, Paul (2004). Auctions: Theory and Practice. ISBN 0-691-11925-2.  Draft edition available online
• Nissanoff, Daniel (2006). FutureShop: How the New Auction Culture Will Revolutionize the Way We Buy, Sell and Get the Things We Really Want. The Penguin Press. ISBN 1-59420-077-7.  (Hardcover, 246 pages)
• Smith, Charles W. (1990). Auctions: Social Construction of Value. ISBN 0-520-07201-4. 

• Auction at the Open Directory Project