Auctions have been a popular mechanism for the disposal or acquisition of goods and services for centuries, not just because they are highly efficient in maximising commercial returns (if managed correctly!), but also because they are often entertaining and compelling events in their own right.
And whilst the romance of the crowded auction room filled with competitive tension and presided over by a gavel-wielding auctioneer may have taken a bit of a hit in the online age, the Internet has nonetheless heralded a bold new age of democracy for the auction.
In breaking down geographical barriers to trade the Internet has enabled ever greater numbers of bidders and sellers to come together. Online events have skyrocketed in both the B2B and B2C arenas, allowing companies such as ebay to become billion dollar businesses in a few short years.
Their proliferation has also spawned, or at least made interested observers aware of, a host of variants on the standard forward or reverse auction theme – and here are just a few examples of the more commonly used formats…
English Auction
English auctions are probably the most common type of auction format. Users make increasing bids (Forward - price increasing) up to the maximum they are willing to pay for an item or service. The event only closes when no additional bids are received in the allotted timeframe or when the auction fails to attract any more bids. The item / service is then sold to the highest bidder at the highest bid price made during the event.
Conversely, English reverse (decreasing in value bids) take the same format as above but seek out decrement bids… often based on rules until no new lower bids are achieved in the allotted timeframe.
English auctions also allow the seller to specify a reserve price below which the item will not be sold.
Sealed Bid Auction
In a sealed bid reverse auction sellers are given a deadline by which they need to submit one best and final bid. Bidding parties are not privy to the identity of any other bidding parties or the value of bids they may make, unlike in a standard reverse auction where each bidder knows exactly how their bid compares to other bids made.
Traditional reverse auctions are typically over in a shorter timeframe and provide an opportunity for the bidding party to view the status of their own and other bids in much the same way as an auction room event.
Reserve Price Reverse Auction
In a reserve price reverse auction the buyer establishes a “reserve price”, or “qualification price”, which is the minimum amount the buyer will need to pay for the goods or service. If the bidding does not reach the reserve the buyer is not obliged to sell.
Fixed Price Auction
The seller establishes a buyout price at which the buyer can simply buy the item being auctioned (at any point during the scheduled auction event). This will end the auction. Variations support a minimum bid that will be accepted and bidders will be prevented from going below this bid. The first bidder(s) to reach this price / value wins.
Japanese Auction
A Japanese reverse auction takes the form of a series of bid rounds. After each bid all remaining participants must signal their willingness to remain in the auction at the current or new price / value. The auction is over when only one participant remains, or when only a pre-set number of participants remain relative to the lines / lots / baskets up for acquisition or disposal.
