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Auction Houses

An auction is the process of buying and selling things by offering them up for bid, taking bids, and then selling the item to the highest bidder. In economic theory an auction is a method for determining the value of a commodity that has an undetermined or variable price. In some cases, there is a minimum or reserve price; if the bidding does not reach the minimum, there is no sale (but the person who puts the item up for auction still owes a fee to the auctioneer). In the context of auctions, a bid is an offered price.

Auctions are publicly seen in several contexts: in the antique business, where besides being an opportunity for trade they also serve as social occasions and entertainment; in the sale of collectibles such as stamps, coins, classic cars, and fine art; in thoroughbred horseracing, where yearling horses are commonly auctioned off; and in legal contexts where forced auctions occur, as when one's farm or house is sold at auction on the courthouse steps.

Although less publicly visible, the most economically important auctions are those in which the bidders are businesses or corporations. Examples of this type of auction include:

  • spectrum auctions, in which companies purchase licenses to use portions of the electromagnetic spectrum for communications (for cell phone networks, for example.)
  • timber auctions, in which companies purchase licenses to log on government land.
  • electricity auctions, in which large-scale generators and consumers of electricity bid on generating contracts.
  • environmental auctions, in which companies bid for licenses to avoid being required to decrease their environmental impact.
  • debt auctions, in which governments sell debt instruments, such as bonds, to investors. The auction is usually sealed and the uniform price paid by the investors is typically the best non-winning bid. In most cases, investors can also place so called non-competitive bids which indicates an interest to purchase the debt instrument at the resulting price, whatever it may be.

Internet auctions, dominated by the wildly successful eBay, have become very popular.

The world's two largest auction houses are Christie's and Sotheby's. The world's largest online auction site is eBay.

Auction catalogs are frequently printed and distributed before auctions of rare and/or collectible items; these catalogs may be very elaborate works, with considerable details about the items being auctioned.

Auctioneers are usually trained in the legal and practical aspects of conducting auctions. Some jurisdictions require auctioneers to be licensed and bonded. Auctioneers who have completed Auctioneer School commonly use the title Colonel and are given this honorary title because in the U.S. Civil War, Colonels of the armies were called upon to auction off the spoils of war.

 

 

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