Purchase and sale transactions are carried out daily and everywhere. Usually, the buyer purchases a product with a clearly fixed price. However, there are auctions - this is a type of economic transaction where the announced price often does not coincide with the final purchase price of the goods.
What is an auction
An auction is the public sale of goods, securities, property of enterprises, works of art and other objects. This sale is carried out according to the established rules. The main principle of the auction is its competitiveness between buyers. During the bidding process, buyers compete for the right to purchase an item by offering their prices for the selected item. The criterion for determining the winner is the price. As soon as the winner of the competition is determined, the auction item is declared sold.
Auctions have existed since the days of the Roman Empire and were usually held after military victories. The term "auction" itself comes from the English word auctionis, which means "increase" or "growth".
What is an English auction
There are eight main types of auctions. Of these, the most common and famous is the English auction. It is also called direct. The principle of this auction is based on the establishment of a minimum price, the so-called "starting" price. It is the starting point for further trades, during which buyers bargaining among themselves gradually increase it.
All incoming proposals are publicly announced. The final price is considered to be formed in the course of the auction and which was the maximum offer for the object of the auction.
The duration of the direct auction is fixed, or the auction lasts until the end of the receipt of new bids. However, there is the concept of a reserve price, that is, the minimum cost for which the seller agrees to sell the product. If during the auction it remains unreached, the item is not sold.
There are two types of English auctions - direct and reverse. In a direct auction, prices rise according to the offer of the bidder or at the request of the auction participants. The highest bidder is considered the winner. These auctions tend to sell unique items such as used items, collectibles, wines, and more.
In the reverse auction, the starting price is set by the buyer. And it is equal to the maximum price at which he agrees to purchase this product. And in this type of bidding, sellers compete, competing with each other. They make offers to the buyer. In this case, the price goes down, not up. This continues until there is a seller who is ready to sell his product at that price.