1. AUCTION OVERVIEW 2. WEB AUCTIONS AND RELATED BUSINESSES
Auction Overview
Topics to cover…
1. Origins of Auctions2. English Auctions3. Dutch Auctions4. First-Price Sealed-Bid Auctions5. Second-Price Sealed-Bid Auctions6. Open-Outcry Double Auctions7. Sealed-Bid Double Auctions
What is an Auction?
Auction
Seller offers an item or items for sale Seller doesn’t establish a price Potential buyers are given
informationor opportunity to examine it
Origins of Auctions
The earliest auctions in 500 B.CAuctions became common activities in 17th centuryBirth of two British Auction Houses
1. Sotheby’s in 17442. Christie’s 1766
English Auctions
Bidders publicly announce their successive higher bids until no higher bid is forthcoming.It is also called “Ascending-Price Auction” or “Open Auction (or Open-Outcry Auction)”Minimum bidReserve Price or Reserve
English Auctions (cont.)
Yankee Auctions
Multiple units of an item
Pay the price bid by the lowest successful bidder
Dutch Auctions
Bidding starts at a high price and drops until a bidder accepts the price.
It is also called “Descending-Price Auctions”
Example of a clock
It is often better for the seller
First-Price Sealed-Bid Auctions
Bidders submit their bids independently
Sharing of information is prohibited
The highest bidder wins
For multiple items, successive lower bidders are awarded the remaining items at the prices they bid.
Second-Price Sealed-Bid Auctions
The highest bidder is awarded the item at the price bid by t he second highest bidder.
They are also called “Vickrey Auctions”
Double Auctions
Open-Outcry Double Auctions Offers are shouted by traders standing on
the trading pit.
Sealed-Bid Double Auctions Buyers and sellers submit combined price-
quantity bids to an auctioneer Auctioneer matches sellers’ offers to the
buyers’ offers
Double Auctions (cont.)
Double auctions work well only for items of known quality.
Such items can be auctioned without bidders inspection.
Auction Type Key Characteristics
English Auction Starting from a low price, bidding increases until no bidder is willing to bid higher.
Dutch Auction Starting from a high price, bidding automatically decreases until the bidder accepts the price.
First-Price Sealed-Bid Auction Secret bidding process; the highest bidder pays the amount of the highest bid.
Second-Price Sealed-Bid Auction(Vickrey Auction)
Secret bidding process; the highest bidder pays the amount of the second highest bid.
Double Auction (Open-Outcry) Buyers and sellers declare combined price-quantity bids. The auctioneer matches seller offers (lowest to highest) with buyer offers (highest to lowest). Buyers and sellers can modify bids based on knowledge gained from other bids.
Double Auction (Sealed-Bid) Buyers and sellers declare combined price-quantity bids. The auctioneer matches seller offers (lowest to highest) with buyer offers (highest to lowest). Buyers and sellers cannot modify their bids.
Web Auctions and Related Businesses
Topics to cover…General Consumer AuctionsSpecialty Consumer AuctionsBusiness-To-Business AuctionsAuction Related ServicesSeller-Bid (Reverse) AuctionGroup Purchasing Sites