| Some History | | | | Sealed-bid first-price auction: Enter the sealed bid |
| Before you can really appreciate the online version of | | | | auction. In this type, all bids are submitted |
| this business, you need to know a little about the | | | | simultaneously in a sealed fashion. The sealed bids are |
| traditional version of it. My research revealed that | | | | opened at the same time and the item is awarded to |
| auctions can be traced back through history to around | | | | the highest bidder, who pays the price he or she |
| 500 B.C. Apparently, at that time, they had an annoying | | | | submitted. |
| habit of selling off wives annually in Babylon. Thankfully, | | | | Sealed-bid second-price auction: this method works |
| auctions (and the rights of women) have undergone a | | | | identically to the sealed-bid first-price method with one |
| major evolution process. | | | | exception. When the sealed bids are opened, the |
| | | | award goes to the highest bidder but he or she pays |
| There are probably about five types of traditional | | | | the price of the second highest bid. |
| auctions, and I suppose, that in theory, any or all of | | | | All-pay auction: In this type, all the bidders must pay the |
| them could be converted into online auctions. | | | | price they bid whether they win the prize or not. Again, |
| English auction consists of the bidding taking place | | | | the highest bidder wins. As you can imagine, this |
| openly with each bid being higher than the previous | | | | method of auction is not used often for commercial |
| one. In this type, the bidding ends when no one wishes | | | | purposes. |
| to bid higher or when the "buy-out" amount has been | | | | Advantages to Online auctions versus traditional |
| reached. At this point, the item is awarded to the | | | | auction houses |
| highest bidder. This is the preferred method by the | | | | Online auctions business models have some |
| famous English auctions houses Sotheby's, Christie's | | | | advantages over the traditional style auction houses. |
| and Phillips. | | | | - Auctions and sales 24 hours a day, seven days a |
| Dutch auction is a little different in that the auctioneer | | | | week |
| starts the bidding with a higher asking price. If no | | | | - No geographical limitations |
| bidders are willing to join in, the price is lowered until | | | | - Large number of buyers who have diverse interests |
| one bidder is willing to accept the price or until a | | | | - Lower transactions costs - item only needs to be |
| predetermined minimum price has been reached. The | | | | moved after the sale |
| winning bidder pays the last announced price for the | | | | Care to dabble a bit in online auctions? What bargains |
| item. The Dutch tulip auctions of the 17th century as | | | | can you engineer? |
| the best known examples of this type of auction. | | | | |