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Auctions

AUCTIONS

A sale open to the general public and conducted by an auctioneer, a person empowered to conduct such a sale, at which property is sold to the highest bidder.

A bid is an offer by a bidder, a prospective purchaser, to pay a designated amount for the property on sale.

A Dutch auction is a method of sale that entails the public offer of the property at a price in excess of its value, accompanied by a gradual reduction in price until the item is purchased.

According to the uniform commercial code (UCC), a body of law governing commercial transactions that has been adopted by the states, the auction sale of any item concludes with the fall of the hammer or in any other customary manner. Such a sale is "with reserve," which denotes that the goods can be withdrawn at any time, until the auctioneer announces the completion of the sale, unless the goods are explicitly put up "without reserve," which signifies that the article cannot be withdrawn after the call for bids unless no bid is made within a reasonable time. In both types of auctions, the bidder can withdraw a bid prior to the auctioneer's announcement that the sale has been completed.

Regulation

As a legitimate business enterprise, auctions cannot be proscribed. They are not above reasonable regulation by both state and local authorities. Some states subject auction sales to taxation.

In the absence of statutes, any person can act as an auctioneer, but a license, which usually restricts his or her authority to a certain region, is often required. Licensing officers can refuse to issue a license, but only if done reasonably, impartially, and to promote the interest of the community.

Agency of Auctioneer

An auctioneer serves as the agent of the seller who employs him or her, and the auctioneer must act in good faith, advance the interest of the seller, and conduct the sale in accordance with the seller's instructions. If real property or goods priced at $500 or more are sold at auction, a written agreement is necessary to satisfy the statute of frauds, an old english law adopted in the United States that requires certain contracts to be in writing. The auctioneer is authorized to sign a memorandum of sale on behalf of both parties, but this authority is limited and expires shortly after the sale has been concluded. Both the buyer and the seller are bound by the announcement of the auctioneer concerning the identity of the property and the terms and conditions of the sale.

In the absence of a statutory provision requiring authority to be in writing, an agent, pursuant to oral authorization, can execute any contract required to be in writing. The statutory provisions vary, however, in regard to the execution of contracts to purchase real property.

Because of the trust and confidence the seller reposes in an auctioneer, the individual cannot delegate the power to sell without special authority from the seller. The delegation of insignificant duties, such as the striking of the hammer and the announcement of the sale, is allowable if conducted pursuant to the auctioneer's immediate supervision and direction.

An auctioneer's authority normally terminates upon the completion of the sale and the collection of the purchase price, but the seller can revoke the authority at any time prior to the sale. According to some authorities, the buyer or seller can end the auctioneer's authority to sign a memorandum on his or her behalf between the time of the fall of the hammer and the signing of the memorandum, but the prevailing view deems the auctioneer's authority to be irrevocable. Private sales by an auctioneer are generally impermissible.

Conduct and Validity of Sale

The owner of the property has the right to control the sale until its conclusion. Unless conditions are imposed by the seller, the auctioneer is free to conduct the sale in any manner chosen, in order to bar fraudulent bidders and to earn the confidence of honest purchasers. The auctioneer cannot amend the printed terms and conditions of the auction, but he or she is empowered to postpone the sale, if that is the desire. The auctioneer can modify the sale terms of goods advertised in a catalog at any time during the sale, if announced publicly and all of the bidders present are cognizant of it. The auctioneer may also retain the right to resell should there be an error or a dispute concerning the sale property. The description of the property in the catalog must be unambiguous. A significant error in a description might cause the cancellation of the sale, although trivial discrepancies between the property and the description are not problematic. The seller can withdraw property until the acceptance of a bid by an auctioneer.

A bid is an offer to purchase, and no obligations are imposed upon the seller until the bid is accepted. It can be made in any manner that demonstrates the bidder's willingness to pay a particular price for the auctioned property, whether orally, in writing, or through bodily movements, such as a wave of the hand. Secret signals between the bidder and the auctioneer militate against equality in bidding and are thereby prohibited. The auctioneer accepts a bid by the fall of the hammer or by any other perceptible method that advises the bidder that the property is his or hers upon tendering the amount of the bid in accordance with the terms of the sale. An auctioneer can reject a bid on various grounds, such as when it is combined with terms or conditions other than those of the sale, or is below the minimum price acceptable to the owner.

As a general rule, any act of the auctioneer, seller, or buyer that prevents an impartial, free, and open sale or that reduces competition in the bidding is contrary to public policy. An agreement among prospective buyers not to bid has been held to void the sale to any buyer within this group. A purchase by a person who has not participated in the illegal agreement remains in effect. A puffer or shill is a person who has no intention of buying but is hired by the seller to place fictitious bids in order to raise the bidding of genuine purchasers. In general, if a purchaser at an auction can prove that a puffer was employed, he or she can void the sale. Some jurisdictions require the buyer to have been financially hurt by the puffer, but others permit an individual to void a sale even if no harm occurred. Puffing and by-bidding are synonymous.

A deposit is not a pledge but a partial payment of the purchase price, usually made payable to the auctioneer who retains it until the completion of the sale.

The property of one person should not be commingled and sold with the property of another by the auctioneer unless notice is furnished to all interested parties, or it might constitute fraud.

An auctioneer is not entitled to bid on property that he or she has been hired to sell, but the auctioneer can, however, bid a particular sum for a purchaser without violating any duties to the seller or even to other prospective bidders.

An auctioneer who does not have the required license but who executes a sale can be

penalized, but the sale remains valid; an auction is void, however, when it is conducted without the owner's consent.

Rights and Liabilities of Buyer and Seller

In an unconditional sale, title passes to the bidder when the auctioneer's hammer falls. If conditions exist, title passes upon their fulfillment or through their waiver, the intentional relinquishment of a known right. The bidder is ordinarily entitled to possession when he or she pays the amount bid.

A person who bids on behalf of another is personally liable for the bid unless the person discloses this relationship to the auctioneer.

Fraud, or a misrepresentation of a material fact on which the buyer detrimentally relied, or the seller's failure to provide good title furnishes a basis for setting aside the sale.

The seller has a lien, a security interest, on the property until the price is paid. If the purchaser fails to comply with the conditions of a sale, the seller can regard the sale as abandoned and sue for damages. Where a resale occurs, and the price is lower than the contract price, the defaulting buyer in some jurisdictions is liable to the seller for the difference between what he or she had agreed to pay and what the seller received on the resale. In general, whether a deposit or a partial payment must be repaid depends upon which party was responsible for the uncompleted sale. If the buyer is responsible, he or she cannot recover either the deposit or partial payment.

Compensation

The party employing the auctioneer pays a commission regardless of whether he or she procures a sale, unless the auctioneer is responsible for the failure of the sale. The auctioneer is entitled to a reasonable sum unless a statute or contract provision determines the amount.

Liabilities of Auctioneer

An auctioneer is usually liable to the seller for monetary losses attributable to his or her negligence in failing to follow the seller's instructions. The auctioneer can also be responsible to the buyer for fraud, conduct in excess of authority, and failure to deliver the goods. Since the auctioneer is a stakeholder, a third party designated by two or more persons to retain on deposit money or property that is the subject of a dispute, the auctioneer is liable to the buyer in those instances where the buyer is entitled to the return of the deposit. An auctioneer who sells property on behalf of one who does not own it and delivers the proceeds to that person is personally liable to the rightful owner even though the auctioneer acted in good faith and without knowledge of the absence of title. He or she can recover his or her losses from the person who received the proceeds in the form of damages that he or she was ordered to pay to the actual owner.

Online Auctions

With its ability to connect potential buyers and sellers from anywhere in the world, the internet has become an increasingly important player in auctions. The first online auctions appeared on the Internet in 1995, and according to the federal trade commission (FTC) these auctions have become "perhaps the hottest phenomenon on the Web." Large organizations can participate in online auctions but so can individual sellers and small businesses.

The rules for online auctions are fairly straightforward. For a typical person-to-person site, the sellers will open an account and are assigned an on-screen name. They must pay a fee whenever they conduct an auction. The seller can set a time limit on the bidding, as well as a minimum price. If a buyer puts in a bid that the seller accepts, they complete the transaction, often via email, arranging for payment and delivery of the goods. Many sites allow buyers to pay by credit card (which protects the buyer in case merchandise is not delivered); some individual sellers require payment by cashier's check or money order (to protect against bounced checks). Some buyers and sellers conduct their money transactions through online payment or online escrow services, which serve as a secure site for sending and receiving payment information. These payment arrangements are more a matter of caution than lack of trust. In fact, auction sites usually offer some form of insurance or guarantees to ensure that merchandise is both paid for and delivered as agreed by the buyer and the seller.

Although online auctions are generally safe for both buyers and sellers, auction fraud does occur. Buyers who report online auction fraud to the FTC commonly complain that merchandise never arrives or that it arrives late or that the merchandise that does arrive is not what was advertised. There are other more problematic types of fraud. In "bid siphoning," a bidder is lured off a legitimate auction site by a phony seller who promises to sell the same item as that being auctioned for a lower price. The buyer sends money to this "seller," who offers no guarantees—and usually no merchandise. Fraudulent online sellers, like their "live" counterparts, may also employ puffers to bid up the price of an item, or they may engage in "bid shielding," in which extremely high bids are submitted and then retracted so that a preferred bidder can put in a lower bid and obtain the item.

Both buyers and sellers who engage in online auctions are advised to take common-sense precautions. First, people should deal with legitimate auction sites whose reputations are established. They should determine that terms of bidding, payment, and delivery are spelled out ahead of time. Also it is a good idea to check out online payment or escrow services, particularly if the buyer or seller insists on using a particular one whose reputation is not known. Buyers and sellers can contact their local branch of the Better Business Bureau to find out whether complaints have been lodged against a particular service or site.

further readings

Federal Trade Commission. 2003. "Internet Auctions: A Guide for Buyers and Sellers." Available online at <www.ftc.gov/bcp/conline/pubs/online/auctions.htm> (accessed October 13, 2003).

Hix, Nancy. 2001. The Business Guide to Selling through Internet Auctions: A Proven Seven-Step Plan for Selling to Consumers and Other Businesses. Gulf Breeze, Fla.: Maximus.

Hultmark, Christina. 2003. Internet Marketplace: The Law of Auctions and Exchanges Online. New York: Oxford Univ. Press.

Gold, Sarah S., and Leon P. Gold. 2001. "Class Counsel Auctions Inconsistent with Reform Act." New York Law Journal 226 (October 10): 3.

Rappaport, Bret, and Joni Green. 2002. "Calvinball Cannot Be Played on This Court: The Sanctity of Auction Procedures in Bankruptcy." Journal of Bankruptcy Law and Practice 11 (March-April): 189–212.

cross-references

Internet; Sales Law; Uniform Commercial Code.

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Auctions

Auctions

HISTORY OF AUCTIONS

STANDARD AUCTION TYPES

AUCTION THEORY

AUCTION EXPERIMENTS AND COMPUTER SIMULATIONS

ONLINE AUCTIONS: PHENOMENA AND PSYCHOLOGY OF BIDDING

BIBLIOGRAPHY

The word auction is derived from the Latin augere, which means, to ascend or increase. The concept of auctioning, however, is not confined solely to bidding processes in which the price is raised successively until only one bidder remains. Rather, the term encompasses a variety of trading methods and is broadly understood as a market institution with explicitly set rules, which determine resource allocation and prices on the basis of bids from market participants (see McAfee and McMillan 1987, p. 701).

HISTORY OF AUCTIONS

Auctions have been used since antiquity and have a colorful history. One of the earliest written records of an auction is a description by Herodotus and dates back to 500 bce (see Cassady 1967, p. 26). At that time in Babylon, women were sold annually as brides in auctions. Auctions were also used in ancient Rome for commercial trade and for the sale of almost anything from slaves to plundered booty and debtors property. Martin Shubik (1983) provides an entertaining sketch of the history of auctions in the Roman and Babylonian empires, while Ralph Cassady Jr. (1967) discusses the types of auctions used in England and America in the seventeenth and eighteenth centuries and the establishment of the world-renowned auction houses Sothebys and Christies.

STANDARD AUCTION TYPES

Despite the variety of auction methods, only four basic types of auctions are commonly used: the ascending bid auction, the descending bid auction, the first-price auction, and the second-price auction. In the ascending-bid auction (also called English or open outcry auction ), the price is successively raised until only one bidder remains, and that bidder wins the auction at the final price. This auction form is most familiar to the general public and is usually used to sell art and other collectibles. In the descending-bid auction (also called Dutch auction, as it has been used for the sale of flowers in the Netherlands), the auctioneer starts at a very high price. The price is gradually lowered until one bidder accepts paying the current price for the auctioned item. This auction is commonly used to sell perishables like fish or flowers. In the other two standard auction formatsfirst-price sealed bid and second-price sealed bid auctionsbids are submitted in sealed envelopes. In both sealed bid auction formats, the winner is the person with the highest bid. The auctions differ in their payment requirements, however: In the first-price auction, the winner pays the amount they have bid; in the second-price auction, the winner pays the second-highest bid. These auctions are most commonly used for procurement of government contracts.

AUCTION THEORY

Although auctions have existed for many centuries, the theory of auctions is a relatively new field in economics. Auctions are market institutions with well-defined rules that determine how the winner is selected and what the payments are, depending on the bids. For that reason auctions are typically modeled and analyzed as bidding games of incomplete information. The first treatment of auctions, which identified the strategic aspect of bidding, is found in the work of William S. Vickrey (1961). Vickrey assumed that each bidder knows precisely how highly he values the item, but does not know anyone elses valuation of the item. The other bidders valuations are perceived to be uncertain; they are drawn from the same probability distribution and are stochastically independent. All bidders are considered risk neutral. Vickreys major contribution is the celebrated revenue equivalence theorem. It states that under the above premises all four auctions generate the same average revenue for the seller. His model is known as the independent private value model and is well suited to situations in which consumers buy an item for their own use. If the item is bought for the purpose of resale, however, it has a single, objective value (the resale value), though bidders may have different guesses about what this value would be. To analyze such a situation, one would need to employ a common value model. The most general treatment of the auction problem, which allows for interdependence among bidders valuations and includes the common value and the private value models as special cases, was developed by Paul R. Milgrom and Robert J. Weber (1982). This entry will establish a revenue ranking for the four standard auction formats, and show that on average, revealing information about the quality of the item put up for sale increases equilibrium bids and, consequently, sellers proceeds.

The purpose of auction theory is twofold. On the one hand, auction theory attempts to explain the existence of certain trading institutions and the functioning of the price formation and exchange processes. On the other hand, it provides a guide on how to tailor the trading mechanism to certain information environments and suggests improvements in already existing institutions. A line of inquiry of both practical and theoretical interest is the design of optimal auctionsauctions generating the highest expected revenue for the seller. In an influential paper, Roger B. Myerson (1981) introduced a method that allows one to design the best-performing trade mechanism for a wide class of environments. Jeremy I. Bulow and D. John Roberts (1989) made Myersons approach accessible to a much broader audience of economists by recasting it in terms of marginal revenues and marginal cost and linking it to the theory of monopoly pricing. The theoretical work on auctions continues to grow rapidlyby December 2006 the Econ Lit Database contained more than two thousand entries with the words auction or auctions, about half of them theoretical.

AUCTION EXPERIMENTS AND COMPUTER SIMULATIONS

Experimental studies of competitive bidding in auctions first appeared in the early 1980s, with a primary focus on testing the theoretical properties of the standard auction formats. The experimental results established several facts about behavior relative to the theoretical predictions. For instance, the revenue equivalence theorem concerning private value auctions fails in the laboratory. Bids in first-price auctions are higher than in Dutch auctions and bids in second-price auctions are higher than in English auctions. These results remain consistent when the number of bidders is changed. The comparative static predictions of the equilibrium model, however, remain valid. Bidders with higher valuations bid higher and bids generally increase with an increased number of bidders. This picture changes in common value auction environments. In a common-value auction, bidders face a more complicated strategic problem because such auctions involve a combination of competitive bidding and value estimation. Inexperienced bidders often fall prey to the winners curse. The bidder who ends up winning the auction has the most optimistic estimate of the value of the auctioned item. This leads to excessively high bids and to winners who pay prices higher than the value of the item on sale. John H. Kagel (1995) provides a comprehensive overview of the experimental literature on auctions. The use of computer simulations to study the performance of market institutions has been proposed by researchers on the crossroad between economics and engineering (for a discussion, see Roth 2002.)

ONLINE AUCTIONS: PHENOMENA AND PSYCHOLOGY OF BIDDING

Since the 1990s online auction sites have been a popular place to trade a variety of goods. By far the most popular online auction site is eBay, which was founded in 1995 and has evolved from a simple online mechanism for buying and selling collectibles to a major marketplace, where in 2001 about $9 billion worth of goods were traded. This is three times more than, for instance, the total sales of Amazon for that year. A phenomenon widely observed on eBay is the tendency of bidders to submit bids in the last seconds of bidding. (This phenomenon, called last-minute bidding or sniping, is pertinent only to eBay-style auctions, which have a predetermined deadline. Amazon-style auctions do not have a hard close. Rather, they have an automatic extension rule that allows bidding to continue if bidding activity is registered in the last ten minutes of an auction.) Explanations for the practice of last-minute bidding have fallen into two categories. One idea, advanced by Patrick Bajari and Ali Hortacsu (2003), attributes this effect to the existence of experts, who wait until the very end of the auction because they do not want to reveal their interest in the item on sale. This argument is valid for common value auctions where expert opinion matters. The late bidding phenomenon also exists in private value auctions and Roth and Axel Ockenfels (2006) provide another rationale for bidding close to an auctions end in these circumstances. Waiting until the end allows bidders to acquire an item at a lower price by preventing bidding wars (the successive escalation of bids). Other issues of interest to both psychologists and economists are the effect of minimum bid and secret reserve prices on bidding behavior. Bajari and Hortacsu (2004) provide an extensive review of the economic research on Internet auctions.

SEE ALSO Economics, Experimental; Game Theory

BIBLIOGRAPHY

Bajari, Patrick, and Ali Hortacsu. 2003. The Winners Curse, Reserve Prices, and Endogenous Entry: Empirical Insights from eBay Auctions. Rand Journal of Economics 4 (2): 329-355.

Bajari, Patrick, and Ali Hortacsu. 2004. Economic Insights from Internet Auctions. Journal of Economic Literature 42 (2): 457-486.

Bulow, Jeremy I., and D. John Roberts. 1989. The Simple Economics of Optimal Auctions. Journal of Political Economy 97 (5): 1060-1090.

Cassady, Ralph, Jr. 1967. Auctions and Auctioneering. Berkeley: University of California Press.

Kagel, John H. 1995. Auctions: A Survey of Experimental Research. In Handbook of Experimental Economics, ed. John H. Kagel and Alvin E. Roth, 501-585. Princeton, NJ: Princeton University Press.

McAfee, R. Preston, and John McMillan. 1987. Auctions and Bidding. Journal of Economic Literature 25 (2): 699-738.

Milgrom, Paul R., and Robert J. Weber. 1982. A Theory of Auctions and Competitive Bidding. Econometrica 50 (5): 1089-1122.

Myerson, Roger B. 1981. Optimal Auction Design. Mathematics of Operations Research 6 (1): 58-73.

Roth, Alvin E. 2002. The Economist as Engineer: Game Theory, Experimentation, and Computation as Tools for Design Economics. Econometrica 70 (4): 1341-1378.

Roth, Alvin E., and Axel Ockenfels. 2006. Late and Multiple Bidding on Second Price Internet Auctions: Theory and Evidence Concerning Different Rules for Ending an Auction. Games and Economic Behavior 55 (2): 297-320.

Shubik, Martin. 1983. Auctions, Bidding, and Markets: An Historical Sketch. In Auctions, Bidding, and Contracting: Uses and Theory, ed. Richard Engelbrecht-Wiggans, Martin Shubik, and Robert M. Stark, 33-52. New York: New York University Press.

Vickrey, William S. 1961. Counterspeculation, Auctions, and Competitive Sealed Tenders. Journal of Finance 16 (1): 8-37.

Damian S. Damianov

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Cars as Toys

Cars as Toys


At sales and auctions of old toys, a prominent part is played by cars, vans, buses, and trucks in a variety of shapes and sizes. It is striking how soon after the invention of the motorcar it became the subject ofmostly boys'fantasies and play. The famous tin toy factories in Nuremberg in Germany produced toy cars in the early 1900s that, because of their delicate nature, did not last very long if used for their intended purpose. They did, however, represent the look of the motorcars of the day very well, producing high, carriagelike vehicles with narrow, spidery wheels and often with a driver and a passenger perched on top. Very soon more detailed products began to be made. Although these were even less suited for the hardships of boys' play in a sandpit, they were very satisfactory from the point of view of correct representation of specific cars, with details such as steering and brakes.

Cars have remained popular toys and over the last century have gone through a number of design phases, from primitive wooden blocks with four wheels to model cars with opening doors and interior details, cars not fit for playing with and out of bounds for younger sisters and brothers. The invention of plastics was a boon to toy producers, enabling them from the 1950s to manufacture relatively strong, correct-looking toy cars in seconds at very low costs. In the early twenty-first century only very young children are willing to accept toy cars that do not look like a specific make and model. Any three-year-old boy will recognize his grandparents' car, and mothers are constantly amazed when their very young sons lecture them on the differences between the various cars they encounter when shopping.

It has long been observed that cars seem largely to belong to the realm of boys, while only a few girls show the same interest. Even if mothers drive as much as fathers, the "car bug" does not seem to infect girls to anything like the same degree as it does boys. While playing with toy cars, boys dream of driving real cars, not in order to move from A to B but just for the sake of driving.

A child's first vehicleapart from a pramusually is a tricycle, often followed by a pedal car. Before World War II such pedal cars rarely tried to represent any particular model, except for a few very expensive examples, the most prominent of which was the toy car built by the luxury automobile producer Bugatti in about 1930 as a scale model of one of its racing cars. Such cars were powered by a small combustion engine. Since the 1990s producers have tried to make their pedal cars at least recognizable as particular models. The use of plastics has made this easier, just as modern electronic developments have made it possible to build and sell small children's cars powered by electric motors and small, rechargeable batteries at very competitive prices.

For a number of years building model cars was popular with many boys. Some very ambitious characters embarked upon the creation of a model from a piece of raw wood or from sheets of cardboard, but by far the most popular way of doing it was to buy a plastic assembly set to be glued together and painted. Only the most enthusiastic ever finished the project or achieved the desired standard, and it appears that computers have won the battle for children's minds. When model cars are sold today they are mostly finished products. Some are produced to a very high standard and at a comparable price, while mass producers have shown themselves capable of producing and selling model cars of a fairly high quality at fairly low prices. These cars are, however, not really meant as toys for children. The same applies to the small electric-powered cars running along slots in sections of miniature roadway. Like model trains, this increasingly has become the realm of hobby clubs for adults.

Even if many children today spend many hours in front of a video screen, the car is still with them. It now takes the shape of various games. There are countless games on the market in which players can drive cars or motorcycles. Most popular are the ones in which players compete on one or several famous racing circuits or rally courses. To enhance the illusion, joysticks in the shape of a steering wheel are available along with the necessary pedals and gearchange. Only the youngest children prefer the pedal car to a computer thus equipped.

While many children dream of driving their own cars, their practical experience with cars often bores them. Most parents are familiar with hearing the question from the back-seat, "Are we there yet?" From the time they are very young, children are placed inside a car and strapped in, unable to do much and confined to looking out of windows that are often too high. Each spring magazines and newspapers swell with good advice to parents planning a driving vacation about how best to keep the children occupied during the many hours of forced inactivity in the backseat.

Since their invention, cars have posed risks for children. They are in a vulnerable position when walking or playing near traffic. Small children are not able to judge the speed of an oncoming car and are generally not in a position to survey what is going on in the street. In many countries much energy is spent on trying to teach children the necessary skills to navigate traffic. In a number of countries, school patrols of older children have been in operation since the 1950s. By creating these patrols authorities tried to solve the problem of not having the manpower to use policemen to guide young children when leaving school. Despite their vulnerability, until they become drivers themselves, most children are involved with cars as consumers of toys and fantasy.

See also: Boyhood; Construction Toys; Toy Technology .

bibliography

Bloemker, Larry, Robert Genat, and Ed Weirick. 1999. Pedal Cars. Osceola, WI: MBI.

O'Brien, Richard. 2000. Collecting Toy Cars and Trucks. Iola, WI: Krause.

Niels Jonassen

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Auctions

AUCTIONS

AUCTIONS are a method of allocating goods and services based on competitive price offerings from sellers and buyers. While auctions can take various forms, the most common form is generally called an English auction, in which the potential buyers compete for the item or set of items offered for sale by raising their bids until a single buyer remains. This process is generally overseen by an auctioneer, who recognizes the various bids as they are made and determines when the bidding is ended. In a Dutch auction, derived from its use in the Netherlands for the wholesale sale of flowers and other agricultural goods, the seller begins with a high price and then lowers it in regular increments. The first buyer to bid gets the object. Due to the split second differences in bids, bidding in these auctions is often done electronically.

There are numerous other variations. Some auctions entail simultaneous bidding from multiple buyers and sellers. This is the method used on most major international mercantile exchanges, such as the Chicago Board of Exchange, where commodity futures are bought and sold. It is commonly referred to as a Japanese auction, however, based on its use in traditional Japanese fish auctions. Other auctions, including most oil and mineral rights auctions, rely on written bids, which must be submitted by a specified time and date when they are opened. This method is also used in what are commonly called "silent auctions." Years ago, before it became common for people to wear watches, there were "candle auctions" in which the bidding ended when the candle went out.

Perhaps the oldest recorded auction is the bride auction described by Herodotus, existing as early as 500 b.c., in which once a year females of marriageable age were sold to the highest bidding suitors. Roman soldiers are recorded as auctioning off captured war booty, sub hasta or "under the spear," to merchants who traveled with the army. The earliest reference to the term "auction" in the Oxford English Dictionary is dated 1595. Auctions appear to have become significantly more common in the seventeenth century as part of the growth in international trade, particularly as a means for selling imported goods. The world famous auctioneer houses of Sotheby's and Christie's were founded in England in 1744 and 1766, respectively. While the names Sotheby's and Christie's are still closely associated with auctions, especially when it comes to the sale of very expensive antiques and art objects, in gross economic terms agricultural and financial auctions entail much larger sums of money. In the 1990s, meanwhile, the Internet became the locus for the emergence of a large number of new auctions, such as those sponsored by eBay and Yahoo.

Despite their common use, auctions have historically had a dubious reputation, in part due to the negative impact that many seventeenth-, eighteenth-, and nineteenth-century auction sales had on established businesses. This was especially true of eighteenth-century seaport auctions in which British goods were often "dumped" in American ports. Auctions were also closely associated with the infamous slave trade. This negative attitude toward auctions was not lessened when they were commonly used, especially on the frontier, in bankruptcy and delinquency sales. Auctions continue to be used in most liquidation sales. Both the positive and negative response generated by auctions relates to their primary use in allocating and pricing goods that have an ambiguous value, be it a Baby lonian bride, Roman war booty, foreign goods, a repossessed farm, a newly discovered artistic masterpiece, an antique necklace, or a highly perishable agricultural commodity. While the auction process resolves what differences might exist, at least for the moment, a good number of people are likely to feel that the auction price was either too high or too low. This ambiguity also offers opportunities for more knowledgeable participants to exploit the less knowledgeable. Since different types of auctions vary in numerous ways, the rules governing them intended to ensure fairness also vary. Many auctions, including most financial and commodity auctions, are restricted to members only. Some auctions allow for reserve prices while others do not. Buyer "rings" are prohibited in some auctions and not in others.

During the last quarter of the twentieth century, as the world economy became more market oriented, auctions grew in importance. Seen as embodying free market principles in their purest form, Western capitalist governments, particularly the United States, have supported their use in allocating resources, including previously owned government resources. This greater use of auctions has also been fostered by the growth of e-commerce and the Internet, which enable otherwise separated individuals to interact directly with each other electronically. Globalization and market growth is likely to further enhance this prominence in the twenty-first century.

BIBLIOGRAPHY

Cassady, Ralph, Jr. Auctions and Auctioneering. Berkeley and Los Angeles: University of California Press, 1967.

Smith, Charles W. Auctions: The Social Construction of Value. New York: Free Press, 1989.

Vickrey, William. "Counterspeculation, Auctions, and Competitive Sealed Tenders." Journal of Finance 16 (1961): 8–37.

Charles W.Smith

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auction

auc·tion / ˈôkshən/ • n. a public sale in which goods or property are sold to the highest bidder. ∎  the action or process of selling something in this way: the Ferrari sold at auction for $10 million. ∎  Bridge the part of the play in which players bid to decide the contract in which the hand shall be played. • v. [tr.] (often be auctioned) sell or offer for sale at an auction: his collection of vintage cars is to be auctioned off tomorrow. PHRASES: on the auction blocksee on the block at block.

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"auction." The Oxford Pocket Dictionary of Current English. 2009. Encyclopedia.com. 24 Aug. 2016 <http://www.encyclopedia.com>.

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auction

auction sb. XVI. — L. auctiō, -ōn-, f. auct-, pp. stem of augēre increase (cf. AUGMENT); see -TION.
Hence auction vb. XIX. auctioneer XVIII; see -EER.

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T. F. HOAD. "auction." The Concise Oxford Dictionary of English Etymology. 1996. Encyclopedia.com. 24 Aug. 2016 <http://www.encyclopedia.com>.

T. F. HOAD. "auction." The Concise Oxford Dictionary of English Etymology. 1996. Encyclopedia.com. (August 24, 2016). http://www.encyclopedia.com/doc/1O27-auction.html

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auction

auctionashen, fashion, passion, ration •abstraction, action, attraction, benefaction, compaction, contraction, counteraction, diffraction, enaction, exaction, extraction, faction, fraction, interaction, liquefaction, malefaction, petrifaction, proaction, protraction, putrefaction, redaction, retroaction, satisfaction, stupefaction, subtraction, traction, transaction, tumefaction, vitrifaction •expansion, mansion, scansion, stanchion •sanction •caption, contraption •harshen, Martian •cession, discretion, freshen, session •abjection, affection, circumspection, collection, complexion, confection, connection, convection, correction, defection, deflection, dejection, detection, direction, ejection, election, erection, genuflection, imperfection, infection, inflection, injection, inspection, insurrection, interconnection, interjection, intersection, introspection, lection, misdirection, objection, perfection, predilection, projection, protection, refection, reflection, rejection, resurrection, retrospection, section, selection, subjection, transection, vivisection •exemption, pre-emption, redemption •abstention, apprehension, ascension, attention, circumvention, comprehension, condescension, contention, contravention, convention, declension, detention, dimension, dissension, extension, gentian, hypertension, hypotension, intention, intervention, invention, mention, misapprehension, obtention, pension, prehension, prevention, recension, retention, subvention, supervention, suspension, tension •conception, contraception, deception, exception, inception, interception, misconception, perception, reception •Übermenschen • subsection •ablation, aeration, agnation, Alsatian, Amerasian, Asian, aviation, cetacean, citation, conation, creation, Croatian, crustacean, curation, Dalmatian, delation, dilation, donation, duration, elation, fixation, Galatian, gyration, Haitian, halation, Horatian, ideation, illation, lavation, legation, libation, location, lunation, mutation, natation, nation, negation, notation, nutation, oblation, oration, ovation, potation, relation, rogation, rotation, Sarmatian, sedation, Serbo-Croatian, station, taxation, Thracian, vacation, vexation, vocation, zonation •accretion, Capetian, completion, concretion, deletion, depletion, Diocletian, excretion, Grecian, Helvetian, repletion, Rhodesian, secretion, suppletion, Tahitian, venetian •academician, addition, aesthetician (US esthetician), ambition, audition, beautician, clinician, coition, cosmetician, diagnostician, dialectician, dietitian, Domitian, edition, electrician, emission, fission, fruition, Hermitian, ignition, linguistician, logician, magician, mathematician, Mauritian, mechanician, metaphysician, mission, monition, mortician, munition, musician, obstetrician, omission, optician, paediatrician (US pediatrician), patrician, petition, Phoenician, physician, politician, position, rhetorician, sedition, statistician, suspicion, tactician, technician, theoretician, Titian, tuition, volition •addiction, affliction, benediction, constriction, conviction, crucifixion, depiction, dereliction, diction, eviction, fiction, friction, infliction, interdiction, jurisdiction, malediction, restriction, transfixion, valediction •distinction, extinction, intinction •ascription, circumscription, conscription, decryption, description, Egyptian, encryption, inscription, misdescription, prescription, subscription, superscription, transcription •proscription •concoction, decoction •adoption, option •abortion, apportion, caution, contortion, distortion, extortion, portion, proportion, retortion, torsion •auction •absorption, sorption •commotion, devotion, emotion, groschen, Laotian, locomotion, lotion, motion, notion, Nova Scotian, ocean, potion, promotion •ablution, absolution, allocution, attribution, circumlocution, circumvolution, Confucian, constitution, contribution, convolution, counter-revolution, destitution, dilution, diminution, distribution, electrocution, elocution, evolution, execution, institution, interlocution, irresolution, Lilliputian, locution, perlocution, persecution, pollution, prosecution, prostitution, restitution, retribution, Rosicrucian, solution, substitution, volution •cushion • resumption • München •pincushion •Belorussian, Prussian, Russian •abduction, conduction, construction, deduction, destruction, eduction, effluxion, induction, instruction, introduction, misconstruction, obstruction, production, reduction, ruction, seduction, suction, underproduction •avulsion, compulsion, convulsion, emulsion, expulsion, impulsion, propulsion, repulsion, revulsion •assumption, consumption, gumption, presumption •luncheon, scuncheon, truncheon •compunction, conjunction, dysfunction, expunction, function, junction, malfunction, multifunction, unction •abruption, corruption, disruption, eruption, interruption •T-junction • liposuction •animadversion, aspersion, assertion, aversion, Cistercian, coercion, conversion, desertion, disconcertion, dispersion, diversion, emersion, excursion, exertion, extroversion, immersion, incursion, insertion, interspersion, introversion, Persian, perversion, submersion, subversion, tertian, version •excerption

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