Business, Legal & Accounting Glossary

Definition: Auction


Quick Summary of Auction

An auction is a method of asset sale by competitive bidding. An auction is most useful when the potential price of the asset to be sold is uncertain. Different auction formats exist, varying according to how prices are quoted and bids tendered. The most commonly known of these is the English Auction, which is commonly used for artworks and wine. This auction is also called the ascending price or open-outcry auction. The best-known auction houses, Sotheby’s and Christie’s, were founded in the eighteenth century, but written records of auctions go back to ancient times. Economists specializing in game theory have investigated the theory of bidding strategies for an auction, and how these strategies depend upon the rules and procedures of the auction. In the business arena, these experts are sometimes hired as consultants for important auctions, such as when the Unites States government sold wireless spectrum licenses by auction.

An auction is usually a public sale. Individuals (potential purchasers) invariably inspect the assets for sale before deciding on whether, and if so, how much, they’d like to bid.

Auctions are held for residential and commercial properties, antiques, cars and even second-hand endowment policies.

Following the bidding, the asset is sold to the highest bidder, provided a ‘reserve price’ set by the seller has been achieved.

The purchaser will be asked to sign a binding contract after bidding successfully, so it’s necessary to ensure that any valuations, searches etc. are carried out prior to the sale.

If you’re thinking of buying a property or car at auction, be careful. These sales are populated by professionals who know the ropes. You’re more likely than they to overpay for an asset!

What is the dictionary definition of Auction?

Dictionary Definition

A public event where goods or property are sold to the highest bidder.

Full Definition of Auction

An auction can be referred to a process of trading goods or commodities by bidding. In an auction any number of goods can be bought or sold by taking bids after bids, the winning bidder finally gets the good. In economics, an auction can be referred to a set of trading rules used for the exchange of goods and services.

Auction can differ in various forms; different forms of auction have different time limits, limits on biding prices, and unique rules for determining the winning bidders. It may be possible that participants may not know the identities or actions of the other participants of the auction. It is not necessary to participate in an auction by being present at the location. There are several online auction sites where you can bid on various goods. There are other means also to attend any auction. You can use telephones also. The seller pays a part of the payment to the auctioneer or auction company, which is usually based on a proportion of the final sale price.

Types of Auction

Broadly there are two types of auctions as-

  • Primary types of auction
  • Secondary types of auction

There are several types of auctions that can be categorized under Primary types of auctions:

  • English auction also is known as open ascending price auction
  • Dutch auction or open descending price auction
  • Sealed first-price auction also named as the first-price sealed-bid auction (FPSB).
  • Vickrey auction is better known as a sealed-bid second-price auction

This is not the end; there are various other types of auction that can be placed under Secondary types of auction.

  • All-pay auction
  • Buyout auction
  • Combinatorial auction
  • No-reserve auction (NR) ), also known as an absolute auction
  • Reserve auction
  • Round robin auction
  • Silent auction
  • Walrasian auction or Walrasian tâtonnement

Time requirement is an essential part of any auction. Every auction has its set of pricing rules, regulations and time period for preparation and conducting of auction. Another factor, which is essential in any type of auction, is a number of simultaneous bidders.

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Auction. Payroll & Accounting Heaven Ltd.
October 04, 2022
Chicago Manual of Style (CMS):
Auction. Payroll & Accounting Heaven Ltd. (accessed: October 04, 2022).
American Psychological Association (APA):
Auction. Retrieved October 04, 2022
, from website:

Definition Sources

Definitions for Auction are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 28th March, 2020 | 0 Views.