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Isn’t it just the simple method of selling an
object to interested people who bid until the
highest bidder gets it?
That is definitely the scenario in most auctions. But
auctions are actually more complex than people
realize. Do you know that not all auctions have
ascending price schemes? While the ascending bid
is the most popular auction format, other
formats exist such as the descending,
simultaneous and handshake forms of bidding.
An auction, in general terms, is the method of
allocating scarce goods. It is a unique selling
method that is based on competition. Truly, the
objectives are simple: the seller wants to
obtain the most money for his item while the
buyers want to purchase it at their own desired
prices. Everything can be sold in auctions –
from singular items like paintings to multiple
units of a homogenous item such as treasury
securities. Auctions are most useful when a
seller is unsure of the price his item can get,
or when selling a commodity with undeterminable
quality.
Some unique things about auctions: the price of an item
is set by the bidders and not by the seller.
Also, the auctioneer doesn’t own the goods but
rather acts as an agent for the real owner.
Lastly, buyers often know the value of an item
more than the seller.
Various classifications of auctions exist. There are
open auctions and sealed-bid auctions. There are
auctions wherein the price simply ascends and
there are auctions where the price drops at
regular intervals. Experts agree, however, that
there are four major one-sided auction formats:
English, Dutch, First-Price sealed-bid, and
Vickrey (uniform second-price).
You may ask which type of auction is the best. It
actually depends on the perspective of both the
seller and the buyer. Some auction types lessen
room for cheating while others seem to actually
encourage such. Some auctions require the
presence of the buyer while some do not. Before
an auction is set, the seller must first analyze
the auction format that would best benefit him.
An aspect of auctioning that is sometimes very
vital is speed. If the item you are selling
perishes quickly, like flowers or fish, of
course a quick auction is required.
While it has its’ advantages, an auction also has
drawbacks, like the so-called “winner’s curse”.
This is the phenomenon when a “lucky” winner
pays more for an item than it is worth. These
winners realize that their valuation of an
object is higher than that of anyone else.
In this age of modern technology, auctions have found a
place where it can thrive and reach more
prospective buyers: the Internet. Online
auctions are becoming more popular each day as
buyers can browse through the products and bid
at their own time and pace. Furthermore, the
range of products people auction online is
endless and intriguing - you could spend hours
just browsing.
All in all, auctions are a pure marketplace at work in
its finest form. So if you’re planning to sell
something, you might consider auctioning it.
Just look at it from this perspective: your
clutter is other people’s treasure. And they’re
going to compete to get it. |
