Auction - Auction Web

Tuna auction at the Tsukiji fish market in Tokyo. Image by Chris 73.

An auction is a process of buying and selling goods by offering them up for bid, taking bids, and then selling the item to the winning bidder. In economic theory, an auction is a method for determining the value of a commodity that has an undetermined or variable price.

There are several variations on the basic auction form, including time limits, minimum or maximum limits on bid prices, and special rules for determining the winning bidder(s) and sale price(s). Participants in an auction may or may not know the identities or actions of other participants. Depending on the auction, bidders may participate in person or remotely through a variety of means, including telephone and the internet. Auctions are generally funded by a fee paid by the seller to the auctioneer or auction company.

Auction History

Auctioning can be traced as far back as 500 B.C. According to ancient Greek scribes, the more generally accepted auction occurred first in Babylon in 500 B.C. During this period, auctions were held annually, and women were sold on the condition of marriage. It was considered illegal to allow a daughter to be sold outside the auction method. Women with "beauty” engendered higher bidding, women without "beauty” had to pay a dowry to be accepted into the auction, and thus the price would be negative.

During the Roman Empire, following military victory, Roman soldiers would often spear the ground to mark the location of spoils in which goods and property were seized. Roman business agents were said to have accompanied warriors into battle to help facilitate expected sales. The Romans also used the auction to liquidate their own property. For example, Marcus Aurelius is said to have auctioned prized heirlooms and furniture, (an auction that, as legend has it, lasted over two months). The most legendary auction occurred in the year 193 A.D. when the entire Roman Empire was put on the auction block by the Praetorian Guard. On March 23rd, The Praetorian Guard first killed Pertinax the emperor, and then announced that the highest bidder could claim the entire Empire. Didius Julianus outbid everyone else for the price of 6,250 drachmas per Guard, an act that initiated a brief civil war. Didius was then beheaded two months later when Septimus Severus conquered Rome.

During the end of the 18th century, soon after the French Revolution, auctions came to be held in taverns and coffeehouses to sell art. Such auctions were held daily, and catalogs were printed to announce available items. Such Auction catalogs are frequently printed and distributed before auctions of rare or collectible items. Many of these catalogs may be very elaborate works themselves, with considerable details about the items being auctioned.

During the American civil war, goods seized by armies were sold at auction by the Colonel of the division. Thus, some of today's auctioneers in the U.S. carry the unofficial title of "colonel". Auctioneers are usually trained in the legal and practical aspects of conducting auctions. Some jurisdictions require auctioneers to be licensed and bonded.

Major auction houses include Christie's, Sotheby's, Lyon & Turnbull, and Bonhams. The Stockholms Auktionsverk, the world's oldest auction house, was established in 1674 in Sweden.

Internet auctions, such as eBay and GoIndustry, have become very popular with the prevalence of Internet. Other websites, such as AuctionZip and Auctioneers, display live auction listings from auctioneers nationwide.

Auctions held by members of the United States Executive Branch are commonly held which feature property that was seized that was, to what they believed, used in the event of a crime. The issue of the morality of this process is debated and is what some would compare to the act of stealing.

Common uses for auctions

Auctions are publicly and privately seen in several contexts and almost anything can be sold at auction. Some typical auction arenas include the following:
The antique business, where besides being an opportunity for trade they also serve as social occasions and entertainment.
In the sale of collectibles such as stamps, coins, classic cars, fine art, and luxury real estate.
The wine auction business, where serious collectors can gain access to rare bottles and mature vintages, not typically available through retail channels.
In the sale of all types of real property including residential and commercial real estate, farms, vacant lots and land.
For the sale of consumer second-hand goods of all kinds, particularly house clearances and online auctions.
Sale of industrial machinery, both surplus or through insolvency.
In commodities auctions, like the fish wholesale auctions.
In livestock auctions where sheep, cattle, pigs and other livestock are sold.
In wool auctions where international agents purchase lots of wool.
In thoroughbred horseracing, where yearling horses are commonly auctioned off; and
In legal contexts where forced auctions occur, as when one's farm or house is sold at auction on the courthouse steps.

Although less publicly visible, the most economically important auctions are the commodities auctions in which the bidders are businesses even up to corporation level. Examples of this type of auction include:

Sales of businesses.

Spectrum auctions, in which companies purchase licenses to use portions of the electromagnetic spectrum for communications (e.g., mobile phone networks).

Private electronic markets using combinatorial auction techniques to continuously sell commodities (coal, iron ore, grain, water...) to a pre-qualified group of buyers (based on price and non-price factors).

Timber auctions, in which companies purchase licenses to log on government land.

Timber allocation auctions, in which companies purchase timber directly from the government Forest Auctions.

Electricity auctions, in which large-scale generators and consumers of electricity bid on generating contracts.

Environmental auctions, in which companies bid for licenses to avoid being required to decrease their environmental impact.

Debt auctions, in which governments sell debt instruments, 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 an interest to purchase the debt instrument at the resulting price, whatever it may be.

Auto auctions, in which car dealers purchase used vehicles to retail to the public.