Bidding system final - 260308

Bidding Systems in the World Tutorial April 2008

What is Bidding?? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Supply Auction Demand Auction Double Auction

Types of Bidding ,[object Object],Regular Bids Proxy Bids The Proxy Bid takes advantage of the computer in the On-Line auction environment. By bidding as much as bidder wants to spend and using a proxy bid software, which will automatically advance the bidding if someone bids more than the current bid. Reverse Bids When a seller sets a Reserve Bid amount they are stating that this value, which is not disclosed to the bidders, except to announce whether the Reserve Bid has been met, is the lowest bid that they will accept as a successful auction.

Types of Auctions ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

English Auction ,[object Object],Definition Commonly Used English auction (since 1674) is used for chattel, art, antiques and for real estate (especially in Australia). E.g. English auction houses like Sotheby's, Christie's, and Phillips Absolute Vs. Reserve If the seller may set a 'reserve' price, then the item will remain unsold if the auction fails to have a bid equal to or higher than the reserve. If there is no reserve price, the auction is called ‘absolute’.

Dutch Auction ,[object Object],Definition Commonly Used Dutch Auction system (since 1887) is normally used when several identical goods like wholesale cut flowers, tobacco, farm products, fish and other perishables are sold simultaneously to an equal number of high bidders.

Sealed-bid First-price Auction ,[object Object],Definition Commonly Used First price auction (since 1770) is used for industrial real estate, building contract work and whenever only one or very few bidders are expected to participate. Winner's Curse The winner actually bids the furthest from the average bid, which is the best estimate of the item’s actual worth (reasonable information). In a Single Unit auction, it is the difference between the amount the winner paid and the next lower bid.

Sealed-bid Second-price Auction / Vickrey Auction ,[object Object],Definition Commonly Used Second price auction (since 1961) is used for treasury bills. This system is normally used, when the difference between the highest bid and average bid is quite high.

Double Auction ,[object Object],Definition Commonly Used Double Auction System is used in stock exchanges like NSE, BSE, NYSE etc. Open-outcry VS Sealed-bid Under Open Double Auction, the buyer and seller can modify the bid based on knowledge gained from other bids. On the other hand, under sealed-bid Double Auction, buyer and seller can not modify the bid.

Japanese Auction ,[object Object],Definition Commonly Used Japanese Auction system normally is not used and usually seen in auction theory.

Swiss Auction ,[object Object],Definition Commonly Used Swiss auction (since 1950) is used for building contract work, where the winning bid is subject to certain conditions like the original specifications have been modified or the available workforce has been reduced due to other not foreseeable commitments. Sometimes, possible conflicts between the architect and the building contractor can amount to unsurpassable difficulties, making it impractical to go ahead with the building project. In that case normally, the contract is awarded to the second best bidder instead. If however the difference in price between the two best bids is greater than a predetermined amount (usually 10%) the firm submitting the best bid may still be forced to honour its bid (or pay damages). In case of Conflict Situation

French Auction ,[object Object],Definition Commonly Used French auction (since 1874) is used for gold, stocks and bonds. At the London Bullion Market the World Market Price for gold is settled at the “morning fix” at 10:30 and at the “afternoon fix” at 15:00. For stocks and bonds at the large exchanges of the World, French auction is used primarily for the first morning transactions.

Chinese Auction ,[object Object],[object Object],Definition Commonly Used Chinese auctions are often used to model political elections or patent races, in which the chance of winning is seen as proportional to the amount spent. Raffle - a lottery scheme where tickets are sold for a chance to win a prize at a draw. Raffle VS Chinese Auction The difference between a raffle and a Chinese auction is that in a raffle with multiple prizes, there is one "hat" from which names are drawn, but in a Chinese auction each prize has its own "hat". This allows ticket buyers can choose which prize to focus on, as opposed to having a first, second, third, etc. prize.

Silent Auction ,[object Object],Definition Commonly Used This auction variant is often used in charity events, when many items may be auctioned simultaneously.

Thank You!! Research India Research India Pvt. Ltd. Phone: +91-9958835533 Email: jsingh@research-india.com Website: www.research-india.com Jaspal Singh

Bidding system final - 260308

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