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An In-depth Look at the Various Types of Auctions

Priyanka Kosta Sonkushre Apr 17, 2019
Selling of goods and services through auctioning can be dated back to 500 BC. Though initially uncommon, this practice has gained significant popularity, resulting in the development of various kinds of auctions...
When a certain item is sold in public through competitive bidding by the buyers, it is known as an auction. This term was derived out of the word augeo, which is Latin for 'to increase'. An auctioneer is a person who conducts the entire process on behalf of the seller.
Auction professionals suggest the kind of auction suitable for a particular item so that maximum profit can be derived out of it. There are different types of auctions, each having their own unique format. Discussed ahead are the various kinds of auction a seller can choose from.

Depending on the Method of Conduction

English Auction

Also known as an open ascending price auction, this method is highly used for selling real estate, antique items, paintings, and secondhand goods. At least two participants are required to carry out this auction.
Before beginning the process, the auctioneer may or may not announce a minimum exceeding value for every higher bid. The seller may set a minimum price for the item to be sold, which if not reached, will render the item unsold.
Participants openly call out their bids, and the one who bids the highest, pays that amount and takes the item home. Another variant of this method is the silent auction in which an auctioneer is not involved, participants write their bids on a sheet of paper placed beside the item to be sold. The person writing the highest bid takes the item along.

Multi-par Auction

Land, farms, timberland, etc., are generally sold through this method. The seller may either sell the entire land to one person or sell portions of it to different buyers.
The portions are decided beforehand so that the offer package is ready before the auction. On the day of the sale, the land is offered as a whole as well as in small portions.
After the bids are submitted, the seller goes through each of them and decides how he wants to sell his property. If selling the land to a single buyer is more profitable, he may sell his property to him, or else he may choose to derive profit by selling portions of land to multiple buyers.

Sealed First-price Auction

Also called first-price sealed-bid auction, it is a type in which the participants do not bid openly, but rather submit their bids in a sealed format to the auctioneer.
This way no participant is aware of what others have bid. When the time frame for submitting bids is over, the sealed envelopes are opened, and the participant with the highest bid pays the price to enjoy ownership.
This method gives the seller an option to secretly study the bids and decide along with the auctioneer the best deal for the item. Government contracts, tenders, etc., are usually issued using this method.

Vickrey Auction

An auctioneer conducting this kind of session uses the same format as mentioned in the sealed first-price auction, with a slight difference in that the winning participant does not need to pay the amount he is willing to pay.
Rather, the amount mentioned in the second highest bid must be paid. This is the reason why this method is also referred to as sealed-bid second-price auction.

Dutch Auction

Items which can easily perish, like fish and other eatables, are sometimes sold by this method.
Here, the auctioneer announces an extremely high bid which is subsequently lowered till a participant agrees to pay a particular bid. This is why it is also known as open descending price auction. It is not widely used for the purpose of auctioning.

Commodity Auction

This multi-unit auction is used when similar items need to sold to consumers. It does not follow an open bid system, and the participants are required to follow the sealed envelope method.
Auctioning is carried out either with a uniform and single transaction price, or varied transaction prices. Commodities like wool, fish, or livestock which can be sold in bulk at wholesale prices are usually auctioned by this method.

No-reserve Auction

This type is also known as an absolute auction. A minimum price for the item is not decided by the seller, due to which more participants are attracted towards the bidding. The highest bidder wins, even if the actual worth of the item is not met. This may not be in the favor of the seller, therefore, not many auctioneers suggest this method.

Reserve Auction

In this method, the seller has the right to decide a minimum price for the item, with or without disclosing it to the participants . If the final bid is lower than the reserved price, the item remains unsold.
The reserved price is either discretionary or fixed beforehand. This form is suitable for sellers who do not want to take any risk of underselling. They can set their bottom line and exercise power on every aspect of the sales process.

Multi-seller Auction

Here, items belonging to different sellers are auctioned in a single event. This kind of auction is beneficial for buyers as well as sellers.
Buyers get the opportunity to bid for several items under one roof, and sellers get to share the cost of promotion amongst each other. This sort of event draws several participants simply because there is a wide range of choice.

Minimum Bid Auction

This format presents a minimum bid value to the bidders before they actually come up and bid for the item. This way they are aware that if they bid below the set price, they will not qualify for the sale. The minimum value is fixed beforehand, and the seller cannot modify it on any occasion.

Depending on the Venue

Ballroom Auction

Bidders are expected to check out the original property on their own, and come to a predetermined convention center or an indoor meeting place for the bidding. Highlights of each property and its pictures are only displayed during the bidding process.

Online Auction

The Internet is now used for auctioning several products and services. Details of products and their images are available on the auction website.
People can browse through them and bid on a desired product. Bidding continues till the deadline is met, after which the product goes in favor of the person who has bid the highest value for the product.

Webcast Auction

Live online auction is conducted via Internet with the auctioneer at a remote setting and bidders scattered worldwide. Participants can place the bid through a bidding interface after going through live videos of the product and audio clips on Internet.
Also known as live online auction, it is conducted via the Internet with the auctioneer at a remote setting and bidders scattered worldwide. Participants can place their bid through a bidding interface after going through live videos of the product and other audio clips on the Internet.

Catalog Auction

When it's not feasible to gather the items for sale at a single place, simply because all are scattered in different locations, this method is used. Participants can inspect the goods by visiting respected locations before the event takes place at a hotel or convention center. A catalog with a list of goods to be auctioned is available there for the bidders.

Caravan Auction

It is called so because the auction professional and bidders actually move from one property to the other located close by, so as to carry out auctioning on the site.

On-site Auction

When sale of a real estate property is conducted in the actual premises of the property, it is known as an on-site auction.
Auctioning is frequently done for real estate, antique items, livestock, businesses, cars, holiday packages, etc. Each aforementioned method is different in terms of time required for conduction and pricing.
When conducted properly, starting right from the first bid to the preparation of the binding agreement after the winning bid is announced, an auction can get the best deal for the seller and the buyer.