UK Accounting Glossary
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.
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.
A public event where goods or property are sold to the highest bidder.
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.
Broadly there are two types of auctions as-
There are several types of auctions that can be categorized under Primary types of auctions:
This is not the end; there are various other types of auction that can be placed under Secondary types of auction.
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.
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This glossary post was last updated: 28th March, 2020