| Primary types of auctions | | | | auction is being replaced by electronic |
| English auction: This is the type of | | | | trading platforms. |
| auction commonly used by the English | | | | Unique bid auction: In this type of |
| auction houses like Sotheby's, | | | | auction users post blind bids and are |
| Christie's, and Phillips. Participants | | | | given a range of prices they can place a |
| bid openly against one another, with | | | | bid in, often a capped limit. The |
| each bid being higher than the previous | | | | highest, or lowest, unique bid wins. For |
| bid. The auction ends when no | | | | instance an auction is given a maximum |
| participant is willing to bid further, | | | | bid of 10. If the top five bids are 10, |
| or when a pre-determined "buy-out" price | | | | 10, 9, 8, 8 then 9 would be the winner |
| is reached, at which point the highest | | | | being the highest unique bid. This a |
| bidder pays the price. The seller may | | | | popular online type of auction. |
| set a 'reserve' price and if the auction | | | | Buy-out auction: This auction has a |
| fails to have a bid equal to or higher | | | | predetermined buy-out price in which the |
| than the reserve, the item remains | | | | bidder can end the auction by accepting |
| unsold. A variant popular in the time of | | | | the buy-out price. The buy-out price is |
| Samuel Pepys was 'auction by candle' in | | | | set by the seller. The bidder can choose |
| which the winning (highest) bid was the | | | | to bid or use the buy-out option. If no |
| last one to be made before a small piece | | | | bidder chooses to utilize the buy-out |
| of lit candle died out.[2] Such auctions | | | | option, the auction ends with the |
| can be vulnerable to collusion, when two | | | | highest bidder winning the auction. |
| or more bidders act together to win the | | | | Combinatorial auction: A combinatorial |
| auction. Following the auction result, | | | | auction is an auction in which bidders |
| the "loser" threatens to to sue the | | | | can place bids on combinations of items, |
| winner, who then proposes a settlement. | | | | or “packages,” rather than just |
| The settlement is actually the | | | | individual items. |
| pre-agreed reward for the loser's | | | | Absolute auction, also known as an |
| cooperation. This strategy described by | | | | Unreserved Auction, No-reserve Auction |
| the economist Susan Athey. | | | | or Auction Without Reserve, is an |
| Chinese auction: Basically, a raffle. | | | | auction with no minimum bid amount, no |
| Dutch auction: In the traditional Dutch | | | | set starting bid, no seller confirmation |
| auction the auctioneer begins with a | | | | of the high bid price, and no buybacks |
| high asking price, which is lowered | | | | of the property being offered by the |
| until some participant is willing to | | | | seller of any agents of the seller. The |
| accept the auctioneer's price, or a | | | | highest bidder will purchase the |
| predetermined minimum price is reached. | | | | property no matter the high bid price. |
| That winning participant pays the last | | | | This type of auction is designed to |
| announced price. The Dutch auction is | | | | attract the maximum participation from |
| named for its best known example, the | | | | the buying public as the seller has |
| Dutch tulip auctions. ("Dutch auction" | | | | committed to convey their property to |
| is also sometimes used to describe | | | | the highest bidder without limitation. |
| online auctions where several identical | | | | It does offer buyers excellent |
| goods are sold simultaneously to an | | | | opportunities from time to time, |
| equal number of high bidders. Economists | | | | however. A 2003 Virginia statute defines |
| call the latter auction a multi-unit | | | | an absolute auction as "an auction where |
| English ascending auction.) | | | | at the time of the auction sale the real |
| Sealed-bid first-price auction: Also | | | | or personal property to be sold will |
| known as Sealed High-Bid Auction or | | | | pass to the highest bidder regardless of |
| First-Price Sealed-Bid Auction (FPSB). | | | | the amount of the highest and last bid." |
| In this type of auction all bidders | | | | In terms of security/privacy, there are |
| simultaneously submit bids so that no | | | | two main types of auctions: |
| bidder knows the bid of any other | | | | In a private auction the identities of |
| participant. The highest bidder pays the | | | | the bidders are hidden, so anyone that |
| price they submitted. | | | | buys the item can remain anonymous. This |
| Sealed-bid second-price auction, also | | | | is normally done for either security |
| known as a Vickrey auction: This is | | | | reasons such as rare gems or art, or to |
| identical to the sealed first-price | | | | avoid embarrassment if the item is more |
| auction, except the winning bidder pays | | | | risque. |
| the second highest bid rather than their | | | | In a public auction, the bidders' |
| own. This is very similar to the proxy | | | | identities are not hidden and anyone is |
| bidding system used by eBay, where the | | | | welcome to attend the auction. |
| winner pays the lesser of their actual | | | | In terms of auctioneers and auction |
| bid and the second-highest bid plus one | | | | items, we can differentiate three types |
| bidding increment. | | | | of auctions: |
| All-pay auction: an auction in which all | | | | exchange auction — also known as |
| bidders must pay their bids regardless | | | | commodity auctions or exchange-commodity |
| of whether they win the prize. The | | | | auctions, are the most closed to the new |
| highest bidder wins the prize. The | | | | participants. The participants include a |
| all-pay auction is often used to model | | | | number of core professional buyers, who |
| lobbying (bids are political | | | | monitor each other to ensure that no one |
| contributions), or other competitions. | | | | is 'cheating' on the community |
| All of the private value auctions listed | | | | sale auction — for art and |
| above are revenue equivalent, in that | | | | one-of-a-kind items |
| they all result in the same expected | | | | dealer auction — for collectibles, |
| revenue for a seller. | | | | cars or machinery |
| Other auction terminology | | | | If more than one identical item is sold, |
| Silent auction: This is often a variant | | | | there are two possible generalizations |
| of an English auction, where bids are | | | | of the second-price auction. In a |
| written on a sheet of paper, and at the | | | | uniform-price auction, all of the |
| predetermined end of the auction, the | | | | winning bidders pay the price submitted |
| highest listed bidder wins the prize. | | | | by the highest non-winning bidder. |
| This auction variant is often used in | | | | Bidders will not typically bid their |
| charity events, and many items may be | | | | true value in a uniform-price auction |
| auctioned simultaneously. Participants | | | | with multiple units. In a Vickrey (or |
| submit bids normally on paper, near the | | | | second-price sealed-bid) auction, the |
| item. Other variations of this type of | | | | pricing rule is more complicated, but |
| auction may include sealed bids. The | | | | preserves the property that bidders will |
| highest bidder pays the price he or she | | | | bid their true valuation. It is also |
| submitted. | | | | possible to auction each identical item |
| Digital art auction: In this | | | | individually. Once each item has been |
| indefinitely long auction, designed for | | | | priced, the winning bidder is entitled |
| unreleased works that are trivially | | | | to buy the remaining goods at the same |
| reproducible at zero cost (recordings, | | | | price. Items the winning bidder opts not |
| software, drug formulas), bidders openly | | | | to purchase are auctioned again. This |
| submit their maximum bids (which may be | | | | system creates a tension between the |
| adjusted or withdrawn at any time). The | | | | desire to hold back on bidding since |
| seller may review the bids and close | | | | later items will almost certainly be |
| with a price of their choosing at any | | | | cheaper, and the chance that by losing |
| time — the successful bidders that pay | | | | the first round of bidding all |
| this price are those whose bid meets or | | | | possibility of purchasing will be lost. |
| exceeds it, and these are the only | | | | Work in the theory of auctions |
| bidders who receive a copy of the item. | | | | contributed to Vickrey's 1996 Bank of |
| Open outcry auction: This type of | | | | Sweden Prize. |
| auction can refer to any auction where | | | | Reverse auction: A type of auction in |
| the auction is conducted orally for | | | | which the role of the buyer and seller |
| people to hear. This type of auction | | | | are reversed, with the primary objective |
| also refers to what is used in stock | | | | to drive purchase prices downward. In an |
| exchanges and commodity exchanges, where | | | | ordinary auction (or also known as |
| trading occurs on a trading floor and | | | | forward auction), buyers compete to |
| traders may enter verbal bids and offers | | | | obtain a good or service. In a reverse |
| simultaneously. Transactions may take | | | | auction, sellers compete to obtain |
| place simultaneously at different places | | | | business. |
| in the trading pit or ring. This type of | | | | |