Auctions - How To Succeed 4

History Concluded In the time of the American Civil War which occurred between 1861 and 1865, it was common practice for whatever goods and chattels were commandeered by the various armies to be sold at auction. The actual auction process was the responsibility of the most senior officer commanding that division, which invariably turned out to be the Colonel. As a result of this generally accepted practice, the auctioneers of today are often referred to with their courtesy title of “colonel”. The introduction of the internet into everyday business has transformed the requirement for auctions. The result of this is that auctioneers are now able to accept bids over the internet from a much wider range of buyers and a far more diverse range of commodities than was ever possible prior to the internet. Principal Types of Auction The English Auction This is also known as an “open cry” auction. The auctioneer opens the bidding by declaring either a suggested opening bid, or a starting price or reserve for the sale item. He then accepts progressively higher bids from the floor from potential buyers. This type of auction is, in fact, fully transparent, or “open”, since the identity of all the bidders is made known to each other throughout the auction. At any particular moment during the proceedings, the highest bidder is said to have the standing bid which only a higher bid from a competing buyer can replace. If, within a particular time frame, there is no competing bidder to challenge the standing bid, then the latter is regarded as the winner. The item is then sold to the highest bidder at the corresponding bid price. However, the practice that is more commonly applied and one which is considered “English” incorporates the adjustment of the price in the direction that is most unfavourable to the bidders. Such a technique would involve increasing the price if the item was being sold to competing bidders, or vice versa, viz. decreasing the price in respect of competing sellers. In a Dutch auction, by contrast, the price would be adjusted in the direction that was favourable to the bidders, i.e. reducing the price if the item is being sold to competing bidders, and vice versa. In the case of an auction that involves just one item for sale, and each bidder has the item privately valued, then the outcome from an English auction is comparable to that from a Vickrey auction. The latter is a form of sealed-bid auction in which potential buyers submit written bids without knowing the value of the bids of any of the other participants in the auction. Although the highest bidder wins, the actual price paid for the item is that relating to the second-highest bid. The English auction produces the same result. Alternative Formats There are a number of variations on the English auction. There is the occasion when the reserve price is not revealed. In some instances, instead of calling out the bid, a signal is used instead, such as displaying a bidding paddle or tugging an ear. In a variant called the open-exit auction, bidders have to make it clear that they are removing themselves from the bidding (and will not be allowed to re-enter). In France, when the final bid has been made for an art object, the Louver can intervene in behalf of the state and purchase the object at the highest bid price. In another instance, a housing cooperative will similarly permit members of that cooperative to pre-empt any potential purchaser of a property constructive by the cooperative. Finally, an English auction may end either at a time designated at the beginning of the auction, or when no new bids have been made. Auctions – How To Succeed