Common Types Of Auctions

Auctions offer a unique method to sell items based on bidders competing against each other to make a winning bid. The seller tries to make the most money they can from the sale, while bidders attempt to purchase an item for a desired amount. A seller can offer anything at an auction, from valuable paintings to household items. The prices these items sell for are typically set by the competing bidders, not the seller. Although this pattern is true for all auctions, there are many different types of auctions that have different pricing structures.

Open auctions with ascending price

An open auction is the most common type used today. Bidders interested in an item will openly compete against one another, hoping the amount they set will discourage others from bidding against them. An auctioneer may call out a price to a current bidder and they will agree or decline. In some auctions the bidders call out amounts themselves. The auction ends when no one is willing to go higher on last price called. This auction type is commonly used to sell antiques, artwork, secondhand property, and real estate.

Open auctions with descending price

In this type of auction, the auctioneer begins with a set price and then begins lowering it until there is a response from the bidders. There is generally a reserve price set that the seller will not allow the item to go below. A descending price auction is not common.

Sealed or blind first-price auctions

In this type of auction, all bidders place the amount they are willing to pay secretly so no one else knows how much they have offered. Participants do not know what others have submitted and therefore cannot adjust their own bids, and each bidder can only bid once. When the time has expired, the bids are opened and the highest bid is accepted. This method is commonly used by companies and organizations to obtain contracts to perform services.

Sealed bid second-price auctions

This type of auction is just like the sealed first-price auction, with the difference being that the winning bid is the second highest bid received. The second highest amount is the price paid by the winner. A sealed bid second-price auction is a common form of auction in real-time bidding for online advertising.

Multi-unit auctions

At this type of auction, more than one identical item is sold at once, instead of conducting separate auctions for each piece separately.

All pay auctions

All pay auctions require all bidders to pay their bid, even if they have not won. The highest bid receives the item. These auctions are used mostly with academic interest and model lobbying, where the bids are political contributions.

Bidding fee auctions

These auctions require the bidder to pay a fixed amount to place a bid on an item. Commonly known as the penny auction, a penny is required as payment in order to participate. Each time the bidder wants to place a new bid, they are charged another penny. The auction runs for a set time and when that time expires, the highest bidder pays the amount of their last bid for the item. All pennies, or initial fees to bid, are kept from the winner and anyone else who bid. The pennies spent to place a bid do not go against the price, so the winner must pay the full amount of their last bid.

Buyout auctions

In this type of auction, there is set “buyout” price that bidders can agree to anytime during the bidding process. If a bidder decides they no longer want to continue bidding for a lower price, they can accept the buyout price. The auction ends with that bidder winning the item and paying the preset buyout amount.

Silent auctions

This type of auction is commonly used for fundraising campaigns where donated items of value are placed on display for people to “silently” bid on. Each item will have a list price and participants walk around writing down their bid offer on a sheet of paper placed by each item. Others can see what someone else has offered and write down their bid underneath it to raise the amount. There is set time for placing bids in a silent auction. Once that time expires, the highest amount written is accepted as the winning bid.

If you would like to learn more about different types of auctions, contact the experts at High Plains Auctioneers. Call us today at (806) 244-6776 or Contact Us by email for more information about our services. You can also view our upcoming auctions to see what we currently have available.