Auctions have more than gained momentum over the past few years. Although many companies have been using auctions for many years, due in large part to the popularity of Ebay and their on-line auctions, the growth of companies and organizations turning to auctions for revenue involvement has more than tripled.
Most auctions can be pretty simple and are believed to date back to Babylon in 500 B.C. What are they? Simply put an auction is the process of buying and selling things by offering them up for bid, taking bids, and then selling the item to the highest bidder
In economic theory, an auction is a method for determining the value of a commodity that has an undetermined or variable price. 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.
Primary types of auctions
In terms of security/privacy, there are two main types of auctions:
Private auction: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 risk.
In a public auction, the bidders' identities are not hidden and anyone is welcome to attend the auction.
Public auction: In a public auction, the bidders’ identities are not hidden and anyone is welcome to attend the auction
Breaking Down the Most Popular Auction Options
Vickrey auctionA Vickrey auction is a type of sealed-bid auction, where bidders submit written bids without knowing the bid of the other people in the auction. The highest bidder wins, but the price paid is the second highest bid. The auction is believed to have been created by William Vickrey. This type of auction is strategically similar to an English auction, and gives bidders an incentive to bid their true value.
English auctionThis is the type of auction commonly used by the English auction houses like Sotheby's, Christie's, and Phillips. 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 auction fails to have a bid equal to or higher than the reserve, the item remains unsold.
Chinese auctionBasically, a raffle.
Dutch auctionIn 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 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.
All-pay auctionAn auction in which all bidders must pay their bids regardless of whether they win the prize. The highest bidder wins the prize. The all-pay auction is often used to model lobbying (bids are political contributions), or other competitions.
Sealed Bid Auctions
Sealed-bid first-price auctionAlso known as Sealed High-Bid Auction or First-Price Sealed-Bid Auction (FPSB). 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.
Sealed-bid second-price auction, also known as a Vickrey auction: This is identical to the sealed first-price auction, except the winning bidder pays the second highest bid rather than their own. This is very similar to the system used by eBay.
Silent AuctionsWhere 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.
Auction CatalogAn auction catalog is a catalog that lists items to be sold at an auction. Each entry typically includes a "lot number" identifying each item uniquely, a detailed textual description, and either an estimated price, or a "reserve" price below which the item will not be sold. Photographs may appear with the entry, or grouped into a separate section of the catalog; for mass-produced items like postage stamps, the textual description may be considered sufficient.
As a combined information source and "sales brochure", an auction catalog must tread a fine line between accuracy and promotion. For instance, any damages or flaws must be described exactly, so that buyers cannot be claim to have been deceived, but at the same time the description will typically include words playing down the bad points (as in "brownish spot that does not detract from appearance" or "faint crease, as is common"). Similarly, special characteristics are also called out, such as "one of only four known examples of this type", or perhaps a photograph of an item of jewelry being worn by a famous person.
Auction catalogs may be sent gratis to favored customers, but the better catalogs will cost, sometimes as much or more than a regular book. These kinds of catalogs may in turn be sold by bookstores, or even appear as items in book auctions.
Some time after the auction is concluded, recipients of the auction catalogs will receive a "prices realized" document, a bare listing of the lot numbers and the prices for which each was sold.
On-line auctions……King of the Hill: eBay
When one thinks of online auctions they typically think of
eBay, the world's largest online auction site. Like most auction companies,
eBay does not actually sell goods that it owns itself. It merely facilitates the process of listing and displaying goods, bidding on items, and paying for them. It acts as a marketplace for individuals and businesses that use the site to auction off goods and services.
EBay was the first company to popularize the notion of conducting an auction over the Internet. The auction software that EBay uses is proprietary and not available to the general public.
Using
Mission Fish as an arbiter, eBay allows sellers to donate a portion of their auction proceeds to a charity of the seller's choice. Some high profile charity auctions have been advertised on the eBay home page, and have raised large amounts of money in a short time.
Auction HousesIf you prefer to have professionals setup and run your auction, then you will need to find an Auction House. No matter where you live, auction houses are always around and have been as long as auctions have been held. Remember auctions were more popular in the mid-twentieth century than they are now.
AuctioneersThere is usually always a need to consider a professional Auctioneer. Even if you decide to setup and create your own auction in-house, keep in mind that good auctioneers can bring much higher prices, for profit or charity proceeds than an amateur.
The party employing the auctioneer pays a commission regardless of whether he or she procures a sale, unless the auctioneer is responsible for the failure of the sale. The auctioneer is entitled to a reasonable sum unless a statute or contract provision determines the amount.
Depending upon what type of auction you are considering, a good place to look for additional information on auctions and auctioneers is
Answers.com and
Wikipedia.
Be sure to check out the 2009 Event Resource Guide, available at the 2008 Northwest Event Show. A special new section on auctioneers has been added to our collection!
