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

Auction (cont.)

Key Terms

Bids Private Valuations Bidders Auctioneer Shill Bidders

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

English Auctions (cont.)

Drawbacks

1. For both sellers and bidders

2. Winner’s Curse

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

General ConsumerAuctions

Ebay.comAnd

Truste

Specialty ConsumerAuctions

CNET.comAnd

Cigarbid.com

Business-To-BusinessAuctions

SmartBargains.comAnd

FastParts.com

Auction-RelatedServices

Escrow.caAnd

SafeBuyer.com

Seller-Bid (Reverse)Auctions

Respond.comAnd

Priceline.com

Group PurchasingSites

letsBuyIt.com

Thanks