Bidding Online Auctions

Auction

According to Wikipedia an auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder. In economic theory, an auction may refer to any mechanism or set of trading rules for exchange.
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. The seller usually pays a commission to the auctioneer or auction company based on a percentage of the final sale price.

Types Of Auctions

There are many auction types. Here are just a few of them :

•    English auction is an open ascending price auction. This type of auction is the most common form of auction in use today. Participants bid openly against one another, with each subsequent bid higher than the previous bid. At least two bidders are required.
•    Dutch auction is an open descending price auction. At Dutch auction the auctioneer begins with a high asking price which is lowered until some participant is willing to accept the auctioneer's price. The winning participant pays the last announced price. In practice the Dutch auction is not widely used.
•    Sealed first-price auction. In this type of auction all bidders simultaneously submit sealed bids so that no bidder knows the bid of any other participant. The highest bidder pays the price they submitted. Such auctions are commonly used in tendering, particularly for government contracts and auctions for mining leases.
•    Vickrey auction. This is identical to the sealed first-price auction except that the winning bidder pays the second highest bid rather than his or her own. Vickrey auctions are rarely used.
•    Multi-unit auctions sell more than one identical item at the same time. This type can be further classified as a uniform price auction or a discriminatory price auction.
•    All-pay auction is an auction in which all bidders must pay their bids regardless of whether they win. The highest bidder wins the item.
•    Bidding fee auction, requires that each participant must purchase bids prior to placing them. When an auction's time expires, the last bidder wins the item and must pay a final bid price
•    Buyout auction is an auction with a set price (the 'buyout' price) that any bidder can accept at any time during the auction, thereby immediately ending the auction and winning the item.
There are many more other auctions types exist.

Online Auction

The online auction model is online based in which participants bid for products over the Internet. The functionality of buying and selling is made possible through auction software which regulates the auction. Several types of actions, mentioned above, are possible online. In an English Auction the initial price starts low and is bid up by successive bidders. In a Dutch Auction, multiple identical items are offered in one auction, with all winning bidders paying the same price -- the highest price at which all items will be sold. Almost all online auctions are English Auction based. The strategic advantages of online model is:
•    No time constraints. Bids can be placed at any time (24/7). Items are listed for a number of days (usually between 1 to 10 days), giving purchasers time to search, decide, and bid. This convenience increases the number of bidders.
•    No geographical constraints. Sellers and bidders can participate from anywhere that has internet access. The items do not need to be shipped to a central location, reducing costs, and reducing the seller's minimum acceptable price.
•    Intensity of interactions. The bidder anticipation is the hope that he will "win."
•    Large number of bidders. The broad scope of products and services available, the ease of access, and the social benefits of the auction process, there are a large number of bidders.
•    Large number of sellers. The large number of bidders and ease of access attract a large number of sellers.
•    Network economies. The bigger circle of operation, the larger the system becomes, and more valuable online business model becomes for all participants.