What is an auction?

When we talk about auction we refer to an organized sale in which there is competition direct and public (although it can also be private) in which a seller offers different products and the buyer or different buyers can offer different prices to pay in order to acquire said good.

When the auction is closed, the property will become part of the person who has offered the most for it. The money or quantity of articles that equal the good (and is stipulated as allowed) will be given in exchange for giving the good.

The main objective of the auction is to be able to sell a product at a higher price or subjectively valued by the consumers. This way, when the auction starts and buyers see the products, they will offer a price for the different items.

Types of auctions

Although we have already told the main idea, there are different types of auction that we will detail below:

  • The English auction (or ascending). It is the most common, in which potential buyers offer an increasingly higher price for the good on offer. Those in the auction can see what the other buyers are bidding and decide whether or not to increase the amount they bid.
  • Dutch (descending). In this auction, one starts from a value and the amount that buyers would pay for the good is reduced until one of them decides to stop the auction and take the good to the stopped amount. Unlike the previous one, the participants cannot observe the bids of others, since they can only stop the auction based on the risk that others make.
  • Spanish (modified Dutch). It is usually used when several goods are auctioned or treasure letters in Spain. Minimum price is established for unknown goods, and they have 2 types of offers: competitive (bid at a specific price) and non-competitive (final price is accepted whatever it is).
  • From sealed envelope. Buyers offer their offer in a sealed envelope and the one with the highest price is chosen, without being able to see who has offered more or less. A variant of this auction is to do the same, but saying what is the second highest price, and then doing another final auction (creates uncertainty for the participants and prices rise).

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