FAQs
4. Auction Types Explained
What are Standard Auctions?
Standard Auctions (also known as Proxy Bidding Auctions)
This is the most common type of online auction and it's really easy to place a bid and even win the item! A seller will list an item, for example a car for $5,000.00. For this example let's say you want that car. You may not have time to watch the item end, some auctions last for days or weeks. With a standard auction you can enter the highest amount you're willing to pay for the item and the OA site will bid for you. Here's how it would work for this car auction. The car is $5,000.00 and you enter $5,300.00 because you don't want to pay more than that. John Doe comes along and bids $5,100.00 just before the auction ends. Now your 'Proxy Bid' will take effect. Without you even being here (you could be in bed sleeping!) the OA site will outbid John Doe's bid automatically, but NOT up to your maximum $5,300. OA will bid just over John Doe's bid. If John Doe comes back and bids $5,400.00 your bidding will stop and John Doe will win, but if John Doe proceeds to outbid you for, let's say $5,200.00, you'll automatically outbid him again. John Doe doesn't want to spend more than that so he's done and you're still winning. If nobody else tries to outbid you on this car auction you become the winning bidder and it's all yours!
However, you do NOT have to enter a maximum bid that you're willing to pay, you can simply enter a single bid at a time just as you would in most other online auctions. What are Dutch Auctions?
Dutch Auctions
A Dutch Auction is normally for multiple item listings, but they don't have to be. On a Dutch Auction whatever you enter as a bid becomes your offer. Unlike Standard Auctions which allow you to enter a maximum amount but only pay enough to win the item, a Dutch Auction uses your maximum amount as your ACTUAL bid. The final auction price is determined by a combination of the competition (how many bidders there were), quantity available (who bid what amount of money on how many items) and the seller's starting bid price. All of these factors determine the final sales price. Dutch auctions can be a lot of fun, but Standard Auctions are usually recommended for most items since buyers are more familiar with Standard Auctions and how the bidding process works.
Here is an example of a Dutch Auction on an automobile. For this example a car dealer will auction 10 identical new cars in a Dutch Auction:
10 identical 2010 Chevrolet Camaros are listed for auction, and the opening price on this auction is $25,000.00 (that means each of the 10 cars at auction are $25,000).
John wants these cars, they're a great deal, and he sees value in reselling them so he bids for 3 of the camaros. He enters a quantity of 3 and a bid of $30,000.00 each.
Carol sells cars for a living and she also sees a great resale deal so she bids for 4 of the Camaros at $27,000.00 each.
Mike has been looking for this very model and he places a bid for 1 of the Camaros at $25,000.00 for one of the cars.
Jerry owns a company and wants to give the cars away as sweepstakes prizes, so he bids on 5 of the cars at $25,000.00 each.
The auction ends and here's how the winners are arranged:
John bid high on 3 of the cars at auction, so he automatically wins the 3 cars. Now there's 7 cars left.
Carol bid $27,000 for 4 of them and her bid is higher than the other 2 so she is also guaranteed 4 of the cars. Now there's 3 cars left.
Mike and Jerry both bid the same amount ($25,000.00). Mike wanted 1 Camaro while Jerry wanted 5 of them. Problem is, there are only 3 cars left. So who gets what? Mike bid first so he still gets his 1 car, and Jerry wanted 5 but now there's only 2 left so Jerry only gets 2 of them. Jerry could have won all 5 of them if he had entered the highest bid (above $30,000) but he chose to take a chance and bid low to save money.
Dutch Auctions are a little confusing, but once you understand how they work it really is not that complicated at all. Remember, if you enter a bid on a Dutch Auction and you win, you have to pay the amount you entered. Dutch Auctions are not like Standard Auctions where your maximum bid is only reached if the bids go that high for an item. Dutch Auction bids are ACTUAL bids. What is a Buy Now auction?
Buy Now Auctions
Buy Now auctions mean just that. You can buy the item right now (there is no bidding). You do not have to place a bid and wait, you can buy it for the set price displayed in the auction. This price does not change, so there's no bidding war between buyers. This type of auction is labeled with a 'Buy Now' graphic so you'll easily spot these types of auctions. Sellers use the 'Buy Now' auctions when they have multiple items to offer, or when they have a single item and they do not want to auction it. It's the same as buying it from a store, you pay the price displayed.
Sellers can label an auction in two different Buy Now formats. First, a seller can list an item as an auction with an optional Buy Now. This means the item is up for a Standard Auction but anybody can buy the item right now for a set price instead. However, once a bid is placed the Buy Now option will vanish and the item is available at auction only.
The second type of Buy Now that a seller can choose to use is the Buy Now Only option. This means the item can not be bid on at all, you can only buy the item for the price displayed.
Standard Auctions (also known as Proxy Bidding Auctions)
This is the most common type of online auction and it's really easy to place a bid and even win the item! A seller will list an item, for example a car for $5,000.00. For this example let's say you want that car. You may not have time to watch the item end, some auctions last for days or weeks. With a standard auction you can enter the highest amount you're willing to pay for the item and the OA site will bid for you. Here's how it would work for this car auction. The car is $5,000.00 and you enter $5,300.00 because you don't want to pay more than that. John Doe comes along and bids $5,100.00 just before the auction ends. Now your 'Proxy Bid' will take effect. Without you even being here (you could be in bed sleeping!) the OA site will outbid John Doe's bid automatically, but NOT up to your maximum $5,300. OA will bid just over John Doe's bid. If John Doe comes back and bids $5,400.00 your bidding will stop and John Doe will win, but if John Doe proceeds to outbid you for, let's say $5,200.00, you'll automatically outbid him again. John Doe doesn't want to spend more than that so he's done and you're still winning. If nobody else tries to outbid you on this car auction you become the winning bidder and it's all yours!
However, you do NOT have to enter a maximum bid that you're willing to pay, you can simply enter a single bid at a time just as you would in most other online auctions. What are Dutch Auctions?
Dutch Auctions
A Dutch Auction is normally for multiple item listings, but they don't have to be. On a Dutch Auction whatever you enter as a bid becomes your offer. Unlike Standard Auctions which allow you to enter a maximum amount but only pay enough to win the item, a Dutch Auction uses your maximum amount as your ACTUAL bid. The final auction price is determined by a combination of the competition (how many bidders there were), quantity available (who bid what amount of money on how many items) and the seller's starting bid price. All of these factors determine the final sales price. Dutch auctions can be a lot of fun, but Standard Auctions are usually recommended for most items since buyers are more familiar with Standard Auctions and how the bidding process works.
Here is an example of a Dutch Auction on an automobile. For this example a car dealer will auction 10 identical new cars in a Dutch Auction:
10 identical 2010 Chevrolet Camaros are listed for auction, and the opening price on this auction is $25,000.00 (that means each of the 10 cars at auction are $25,000).
John wants these cars, they're a great deal, and he sees value in reselling them so he bids for 3 of the camaros. He enters a quantity of 3 and a bid of $30,000.00 each.
Carol sells cars for a living and she also sees a great resale deal so she bids for 4 of the Camaros at $27,000.00 each.
Mike has been looking for this very model and he places a bid for 1 of the Camaros at $25,000.00 for one of the cars.
Jerry owns a company and wants to give the cars away as sweepstakes prizes, so he bids on 5 of the cars at $25,000.00 each.
The auction ends and here's how the winners are arranged:
John bid high on 3 of the cars at auction, so he automatically wins the 3 cars. Now there's 7 cars left.
Carol bid $27,000 for 4 of them and her bid is higher than the other 2 so she is also guaranteed 4 of the cars. Now there's 3 cars left.
Mike and Jerry both bid the same amount ($25,000.00). Mike wanted 1 Camaro while Jerry wanted 5 of them. Problem is, there are only 3 cars left. So who gets what? Mike bid first so he still gets his 1 car, and Jerry wanted 5 but now there's only 2 left so Jerry only gets 2 of them. Jerry could have won all 5 of them if he had entered the highest bid (above $30,000) but he chose to take a chance and bid low to save money.
Dutch Auctions are a little confusing, but once you understand how they work it really is not that complicated at all. Remember, if you enter a bid on a Dutch Auction and you win, you have to pay the amount you entered. Dutch Auctions are not like Standard Auctions where your maximum bid is only reached if the bids go that high for an item. Dutch Auction bids are ACTUAL bids. What is a Buy Now auction?
Buy Now Auctions
Buy Now auctions mean just that. You can buy the item right now (there is no bidding). You do not have to place a bid and wait, you can buy it for the set price displayed in the auction. This price does not change, so there's no bidding war between buyers. This type of auction is labeled with a 'Buy Now' graphic so you'll easily spot these types of auctions. Sellers use the 'Buy Now' auctions when they have multiple items to offer, or when they have a single item and they do not want to auction it. It's the same as buying it from a store, you pay the price displayed.
Sellers can label an auction in two different Buy Now formats. First, a seller can list an item as an auction with an optional Buy Now. This means the item is up for a Standard Auction but anybody can buy the item right now for a set price instead. However, once a bid is placed the Buy Now option will vanish and the item is available at auction only.
The second type of Buy Now that a seller can choose to use is the Buy Now Only option. This means the item can not be bid on at all, you can only buy the item for the price displayed.