Auctions are markets where prices vary (dynamic pricing) depending on the competition
among the participants who are buying or selling products or services.
They can be classified broadly as C2C or B2C, although generally the term C2C
auction refers to the venue in which the sale takes place, for example, a consumeroriented
Web site such as eBay, which also auctions items from established merchants.
A B2C auction refers to an established online merchant that offers its own
auctions. There are also numerous B2B online auctions for buyers of industrial
parts, raw materials, commodities, and services. Within these three broad categories
of auctions are several major auction types classified based upon how the bidding
mechanisms work in each system:
• English auctions: A single item is up for sale from a single seller. Multiple buyers
bid against one another within a specific time frame, with the highest bidder
winning the object, as long as the high bid has exceeded the reserve bid set by
the seller, below which he or she refuses to sell.
• Traditional Dutch auctions: Sellers with many identical items sold in lots list a
starting price and time for the opening of bids. As the clock advances, the price
for each lot falls until a buyer offers to buy at that price.
• Dutch Internet auctions: Sellers with many identical items for sale list a minimum
price or starting bid, and buyers indicate both a bid price and a quantity
desired. The lowest winning bid that clears the available quantity is paid by all
winning bidders. Those with the highest bid are assured of receiving the quantity
they desire, but only pay the amount of the lowest successful bid (uniform
pricing rule).
• Name Your Own Price or reverse auctions: Buyers specify the price they are willing
to pay for an item, and multiple sellers bid for their business. This is one
example of discriminatory pricing in which winners may pay different amounts
for the same product or service depending on how much they have bid.
• Group buying or demand aggregation auctions: In the group-buying format, the
more users who sign on to buy an item, the lower the item’s price falls. These
are generally B2B or B2G sites where small businesses can collectively receive
discount prices for items that are purchased in high volumes.