E-AUCTIONS

E-AUCTIONS

An online auction is an auction which is held over the internet. Online auctions come in many different formats, but most popularly they are ascending English auctions, descending Dutch auctions, first-price sealed-bid, Vickrey auctions, or sometimes even a combination of multiple auctions, taking elements of one and forging them with another. The scope and reach of these auctions have been propelled by the Internet to a level beyond what the initial purveyors had anticipated.This is mainly because online auctions break down and remove the physical limitations of traditional auctions such as geography, presence, time, space, and a small target audience.[1] This influx in reachability has also made it easier to commit unlawful actions within an auction.In 2002, online auctions were projected to account for 30% of all online e-commerce due to the rapid expansion of the popularity of the form of electronic commerce.

There are different basic types of online auctions:

English Auctions

In live terms, English auctions are where bids are announced by either an auctioneer or by the bidders and winners pay what they bid to receive the object. English auctions are claimed to be the most common form of third-party on-line auction format used and is deemed to appear the most simplistic of all the forms. The common operational method of the format is that it is an ascending bid auction in which bids are open for all to see. The winner is the highest bidder and the price is the highest bid.The popularity of the English auction is due to the fact that it uses a mechanism that people find familiar and intuitive and therefore reduces transaction costs. It also transcends the boundaries of a traditional English auction where physical presence is required by the bidders, making it increasingly popular even though there is a susceptibility to various forms of cheating.

Dutch Auctions

Dutch auctions are the reverse of English auctions whereby the price begins high and is systematically lowered until a buyer accepts the price. Sites that offer Dutch auction services are usually misleading and the term 'Dutch' tends to have become common usage for the use of a uniform-price rule in a single unit auction as opposed to how it is originally intended for that of a declining price auction.However, with actual on-line Dutch auctions where the price is descending, it was found that auctions have on average a 30% higher ending price than first-price auctions with speculation pointing to bidder impatience or the effect of endogenous entry on the Dutch auction.

First-price Sealed-bid

First-price sealed-bid auctions are when a single bid is made by all bidding parties and the single highest bidder wins, and pays what they bid. The main difference between this and English auctions is that bids are not openly viewable or announced as apposed to the competitive nature which is generated by public bids. From the game-theoretic point of view, the first-price sealed-bid auction is strategically equivalent to the Dutch auction; that is, in both auctions the players will be using the same bidding strategies.