Daily entries from the 17th century London diary
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Wikipedia
An English auction is a type of auction, whose most typical form[clarification needed] is the "open outcry" auction. The auctioneer opens the auction by announcing a Suggested Opening Bid, a starting price or reserve for the item on sale and then accepts increasingly higher bids from the floor consisting of buyers with a possible interest in the item. Unlike sealed bid auctions, "open outcry" auctions are "open" or fully transparent as the identity of all bidders is disclosed to each other bidder during the auction. The highest bidder at any given moment is considered to have the standing bid, which can only be displaced by a higher bid from a competing buyer. If no competing bidder challenges the standing bid within a given time frame, the standing bid becomes the winner, and the item is sold to the highest bidder at a price equal to his or her bid. More generally an auction mechanism is considered "English" if it involves an iterative process of adjusting the price in a direction that is unfavorable to the bidders (increasing in price if the item is being sold to competing buyers or decreasing in price in a reverse auction with competing sellers). In contrast, a Dutch auction would adjust the price in a direction that favored the bidders (lowering the price if the item is being sold to competing buyers, increasing it, if it is a reverse auction). When the auction involves a single item for sale and each participant has as an independent private value for the item auctioned, the outcome of an English auction is theoretically equivalent (or isomorphic) to that of the Vickrey auction, and both mechanisms have dominant strategies [1]. Both the Vickrey and English auction, although very different procedurally, award the item to the bidder with the highest value at a price equal to the value of the second highest bidder. [2]
[edit] Variations
There are many variations on this auction system. Sometimes, the reserve price is not revealed. Also, bids may be made with signals instead of being called out. Such signals can include tugging an ear or raising a bidding paddle. Another variation on the English auction is the open-exit auction, where the bidders must announce that they are dropping out of the bidding and they can't reenter. In France, when the last bid has been made in an auction for an art object, a member of the Louvre can say "Préemption de l'état" (Pre-emption of the state) and buy the object for the highest bid. Some housing cooperatives similarly allow members of the cooperative to pre-empt any buyer of a house constructed by the cooperative[3].
English auctions may end at a specified time, or they may end when no new bids have been made after a period of time.
[edit] Candle auction
Candle auction was used from about 1490 to 1893 and is occasionally used even today for ceremonial purposes (and on-line). After 1674 the Candle auction was gradually replaced by the English auction in most cases. Both types of auction are ascending open auctions.
The auctioneer will light a one-inch tallow candle on top of his desk and accept bids only as long as the candle is burning (15 to 20 minutes). In Samuel Pepys' (1633-1703) diary of his London life he relates two occasions when the Admiralty (his employer) sold surplus ships “by an inch of candle”. (November 1660 and September 1662). (An English auction would require 20 seconds to 10 minutes). Pepys also records a hint from a highly successful bidder, who had observed that, just before expiring, a candle-wick always flares up slightly: on seeing this, he would shout his final - and winning - bid.
It is the unpredictability of the exact moment, when no more bids will be accepted, that is used again in the age of the Internet. In these “Candle auctions without a candle” a computer will randomly select the exact moment, when the auction will end. The idea is to prevent bidders from waiting until the very last second before submitting their final bids. Instead the bids will be spread out and submitted a bit earlier. Additional bids may then increase the final bid. In this way the final bid will reach a higher level than would otherwise be the case. Everything can be computerized and the auction conducted on-line without a live auctioneer. The on-line auction tactic of holding off from making any bids at all until the very last moment, and then making a very large bid, is known as auction sniping. The sniping tactic usually gives other bidders too little time to out-bid, or to calculate how much to bid, since the sniper's maximum bid level is not revealed, and thus, the sniper often wins.
[edit] See also
[edit] Notes and References
‹The template Fnb is being considered for deletion.› Note 1: OBOS, a housing cooperative in Oslo that practices preemption.
[edit] References
- ^ Preston McAfee and John McMillan. Auctions and Bidding. Journal of Economic Literature, 699-738, 1987.
- ^ Tuomas Sandholm. Limitations of the Vickrey Auction in Computational Multiagent Systems. Proceedings of the Second International Conference on Multi--Agent Systems, 299-306, 1996.
- ^ OBOS is a housing cooperative in Oslo which allows its members to pre-empt whenever one of their houses are sold
1893 text
The old-fashioned custom of sale by auction by inch of candle was continued in sales by the Admiralty to a somewhat late date. See September 3rd, 1662.
Annotations
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Samuell gives a good description of the auction
[Inch of candle]