Bidders are not obligated to accept the opening bid, and if an item receives no bids, the auctioneer will lower the starting/opening bid price. For business auctions, the term refers to a specific type of auction process (also called e-auction, sourcing event, e-sourcing or eRA, eRFP, e-RFO, e-procurement, B2B Auction). Open procurement processes, which are a form of reverse auction, have been commonly used in government procurement and in the private sector in many countries for many decades. Never formally disclosed, the reserve price is the confidential minimum price agreed upon between the consignor and the auction house. Reserves must be set at or below the low estimate, and if bidding ends before the reserve is reached, the property will not be sold. A Dutch auction also refers to a type of auction whereby the price of an item is lowered until there is a bid.

  1. Additionally, sellers may be more willing to accept lower prices in an online auction because they save on costs like shipping and storage.
  2. Auctions come in a variety of types and categories, which are sometimes not mutually exclusive.
  3. A commission paid by the consignor to the auction house, which is deducted from the hammer price.
  4. Thus there is a certain margin of safety to ensure that there will indeed be a lively auction with many bids submitted.
  5. In some countries, such as Australia, auctioning is a common method for the sale of real estate.

In the United States, the Federal Communications Commission created FCC auction 1001 as a reverse auction in order to get back much of the 600MHz band from television broadcasting. The remaining TV stations would then be repacked onto the lower UHF and even VHF TV channels. After the reverse auction in June 2016, a forward spectrum auction (FCC auction 1002) will then be held, with mostly mobile phone carriers as the buyers. Auctions with more than one winner are called multi-winner auctions.[79] Multiunit auction, Combinatorial auction, Generalized first-price auction and Generalized second-price auction are multi-winner auctions. Auctions come in a variety of types and categories, which are sometimes not mutually exclusive. A commission paid by the consignor to the auction house, which is deducted from the hammer price.

Other Word Forms of Auction

Property seized for non-payment of property taxes, or under foreclosure, is sold in this manner. Police auctions are generally held at general auctions, although some forces use online sites including eBay, to dispose of lost and found and seized goods. Debt auctions, in which governments issue and sell debt obligations, 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 interest to purchase the debt obligation at the resulting price, whatever it may be.


Discover the definition and functioning of auctions in the finance industry. Learn about the pros and cons of this popular method of conducting sales. The range of auctions’ contexts is extremely wide and one can buy almost anything, from a house to an endowment policy and everything in between. Some of the recent developments have been the use of the Internet both as a means of disseminating information about various auctions and as a vehicle for hosting auctions themselves. These contexts include antiques, paintings, rare collectibles, expensive wines, commodities, livestock, radio spectrum, used cars, real estate, online advertising, vacation packages, emission trading, and many more. These examples are programmatically compiled from various online sources to illustrate current usage of the word ‘auction.’ Any opinions expressed in the examples do not represent those of Merriam-Webster or its editors.

An auction is a sales event wherein potential buyers place competitive bids on assets or services either in an open or closed format. Auctions are popular because buyers and sellers believe they will get a good deal buying or selling assets. It’s important to note that there are different types of auctions, including English auctions, Dutch auctions, sealed bid auctions, and more. Each type follows a specific set of rules to determine the winning bidder and the final price. In any auction prospective buyers are usually permitted to examine the items for sale beforehand.

Translations of auction

The seller may choose to hold just one round of bidding, or the seller may select two or more bidders for an additional auction round. Sellers can disclose the reserve price in their descriptions or upon request from potential buyers. Some auction bidders are opposed to reserve prices because they reduce the possibility of winning the auction at a bargain price and because they create uncertainty as to the minimum price that must be paid to win the auction. Common to auctions, a reserve price or a reservation price is the minimum amount that a seller will accept as the winning bid.

In this model an item valuation derives from the sale of the acquired items via their demand distribution, sale price, acquisition cost, salvage value and lost sales. They established monotonicity properties for the value function and the optimal dynamic bid policy. They also provided a model[126]
for the case in which the buyer must acquire a fixed number of items either at a fixed buy-it-now price in the open market or by participating in a sequence of auctions. The objective of the buyer is to minimize their expected total cost for acquiring the fixed number of items. Each lot is given a low and high estimate, representing the opinion of experts about the range in which the lot might sell at auction.

Words Ending With

The guarantee may be provided by the auction house, by a third party or jointly by the auction and a third party. Third parties providing all or part of a guarantee benefit financially if a guaranteed lot is sold successfully and may incur a loss if the sale is not successful. A term frequently used by appraisers referring to their judgment and opinion about an object’s likely sale price if offered by a willing seller to a willing buyer. Since the auction process is open to all bidders, a sale at auction is considered to be a measure of Fair Market Value.

Dutch auctions are used when there is more than one identical item up for sale. In a Dutch auction, all items are initially offered at the same high price. Then, the prices are lowered until a buyer accepts the current price and purchases the item. For example, an Ohio auction house has scheduled an auction to liquidate the equipment from a bankrupt manufacturing firm. One item on auction is a stamping press used to shape sheets of steel into automotive body panels. The auction firm sets a reserve price of $250,000 based on the recommendation of the bankruptcy trustee but opens the bidding at $100,000.

Beyond explicit collusion, a tacit coordination of bidders to keep bids low is at least theoretically possible. The portions of the total amount, bidders can bid, are limited to lower numbers than the total amount. Therefore, only a portion of the total amount will be traded for the best price and the rest to the suboptimal prices. Multiunit auctions sell more than one identical item at a time, rather than having separate auctions for each. This type can be further classified as either a uniform price auction or a discriminatory price auction.

Estimates are based on the examination of an item and recent auction records of comparable pieces. Published in online and printed catalogues, an estimate provides prospective buyers with an important preliminary guide auction definition to value and is generally the basis for establishing the reserve price. After several bidders bring the price to $175,000, a firm that once competed with the bankrupt parts maker bids $200,000 for the press.

In an open auction, parties come together at a physical venue or online exchange to bid on assets. Although the history of the Japanese reverse auction is unknown, they are widely used in the world of business-to-business procurement as a form of cost negotiation. Static auction is alternative to dynamic auction and regular negotiation process in commerce especially on B2B electronic marketplace.

Some sellers offer a “buy it now” feature so you can buy and pay for the item immediately. If an item is an auction, the seller chooses a starting price and interested parties can bid against other buyers. Buyers can participate in e-auctions from anywhere in the world, and sellers can reach a much larger pool of potential buyers than they would if they were selling through a traditional auction house. Reverse auctions are used when a buyer wants to purchase a good or service from multiple sellers.

Absentee bids are also called “written,” “commission” or “order” bids and may be placed by filling out and submitting an Absentee Bid Form, or online. Similarly, a home may end up being auctioned if the homeowner does not pay the assessed property taxes. In this case, the unpaid tax authority rather than the bank seizes the property. The auction is conducted by a local sheriff, clerk, or the county or local tax authority’s comptroller’s office.