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Auction
An auction is the process of buying and selling things by offering them up
for bid, taking bids, and then selling the item to the highest bidder. In
economic theory an auction is a method for determining the value of a commodity
that has an undetermined or variable price. In some cases, there is a minimum or
reserve price; if the bidding does not reach the minimum, there is no sale (but
the person who puts the item up for auction still owes a fee to the auctioneer).
In the context of auctions, a bid is an offered price.
Auctions are publicly seen in several contexts:
in 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, luxury real
estate, and fine art
for the sale of second-hand goods of all kinds, particularly house clearances
and online auctions
in commodities auctions, like the fish wholesale auctions
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 (for cell phone networks, for
example)
timber auctions, in which companies purchase licenses to log on government land
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.
The world's three largest auction houses are Christie's, Sotheby's and Bonhams.
Internet auctions have become very popular; the world's largest auction site is
eBay.
Auction catalogs are frequently printed and distributed before auctions of rare
and/or collectible items; these catalogs may be very elaborate works, with
considerable details about the items being auctioned.
Auctioneers are usually trained in the legal and practical aspects of conducting
auctions. Some jurisdictions require auctioneers to be licensed and bonded. In
the U.S., auctioneers who have completed Auctioneer School commonly use the
title Colonel and are given this honorary title because in the U.S. Civil War,
Colonels of the armies were called upon to auction off the spoils of war.
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