English auction
Encyclopedia
An English auction is a type of auction
, whose most typical form is the "open outcry" auction. The auctioneer opens the auction by announcing a Suggested Opening Bid, a starting price or reserve for the item on sale and then accepts increasingly higher bids from the floor consisting of buyers with a possible interest in the item. Unlike sealed bid auctions, "open outcry" auctions are "open" or fully transparent as the identity of all bidders is disclosed to each other during the auction. The highest bidder at any given moment is considered to have the standing bid, which can only be displaced by a higher bid from a competing buyer. If no competing bidder challenges the standing bid within a given time frame, the standing bid becomes the winner, and the item is sold to the highest bidder at a price equal to his or her bid.
More generally an auction mechanism is considered "English" if it involves an iterative process of adjusting the price in a direction that is unfavorable to the bidders (increasing in price if the item is being sold to competing buyers or decreasing in price in a reverse auction with competing sellers). In contrast, a Dutch auction
would adjust the price in a direction that favored the bidders (lowering the price if the item is being sold to competing buyers, increasing it, if it is a reverse auction). When the auction involves a single item for sale and each participant has as an independent private value for the item auctioned, the expected payment and expected revenues of an English auction is theoretically equivalent to that of the Vickrey auction
, and both mechanisms have weakly dominant strategies. Both the Vickrey and English auction, although very different procedurally, award the item to the bidder with the highest value at a price equal to the value of the second highest bidder.
In France
, when the last bid has been made in an auction for an art object, a member of the state
can say "Préemption de l'état" ("Pre-emption of the state") and buy the object for the highest bid. Some housing cooperatives similarly allow members of the cooperative to pre-empt any buyer of a house constructed by the cooperative. English auctions may end at a specified time, or they may end when no new bids have been made after a period of time.
flame, which was intended to ensure that no one could know exactly when the auction would end and make a last-second bid. Sometimes, other unpredictable processes, such as a footrace, were used in place of the expiration of a candle.
Auction by the candle was known in England by 1641, when it is mentioned in the records of the House of Lords. The practice rapidly became popular, and in 1652, John Milton
wrote, "The Council thinks it meet to propose the way of selling by inch of candle, as being the most probable means to procure the true value of the goods." Samuel Pepys
's diary of his London life records two occasions when the Admiralty (his employer) sold surplus ships "by an inch of candle" (November 1660 and September 1662). Pepys also relates a hint from a highly successful bidder, who had observed that, just before expiring, a candle-wick always flares up slightly: on seeing this, he would shout his final - and winning - bid.
Although the candle auction went out of favor in the 18th century, a few candle auctions are still held today as a form of tradition
. In Chedzoy, Somerset, a plot of church land is sold by candle auction once every 21 years. In Tatworth
, a 6 acres (24,281.2 m²) plot is auctioned by candle once per year. And in Bourne, Lincolnshire
, the 1 acres (4,046.9 m²) White Bread Meadow is auctioned by means of a race between two boys from the town.
A modern variant of the candle auction is used in some online auction systems to prevent auction sniping
. In these auctions, a computer randomly selects the time when the auction will end to discourage snipers from attempting to enter bids at the last second.
Auction
An auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder...
, whose most typical form is the "open outcry" auction. The auctioneer opens the auction by announcing a Suggested Opening Bid, a starting price or reserve for the item on sale and then accepts increasingly higher bids from the floor consisting of buyers with a possible interest in the item. Unlike sealed bid auctions, "open outcry" auctions are "open" or fully transparent as the identity of all bidders is disclosed to each other during the auction. The highest bidder at any given moment is considered to have the standing bid, which can only be displaced by a higher bid from a competing buyer. If no competing bidder challenges the standing bid within a given time frame, the standing bid becomes the winner, and the item is sold to the highest bidder at a price equal to his or her bid.
More generally an auction mechanism is considered "English" if it involves an iterative process of adjusting the price in a direction that is unfavorable to the bidders (increasing in price if the item is being sold to competing buyers or decreasing in price in a reverse auction with competing sellers). In contrast, a Dutch auction
Dutch auction
A Dutch auction is a type of auction where the auctioneer begins with a high asking price which is lowered until some participant is willing to accept the auctioneer's price, or a predetermined reserve price is reached. The winning participant pays the last announced price...
would adjust the price in a direction that favored the bidders (lowering the price if the item is being sold to competing buyers, increasing it, if it is a reverse auction). When the auction involves a single item for sale and each participant has as an independent private value for the item auctioned, the expected payment and expected revenues of an English auction is theoretically equivalent to that of the Vickrey auction
Vickrey auction
A Vickrey auction is a type of sealed-bid auction, where bidders submit written bids without knowing the bid of the other people in the auction, and in which the highest bidder wins, but the price paid is the second-highest bid. The auction was created by William Vickrey...
, and both mechanisms have weakly dominant strategies. Both the Vickrey and English auction, although very different procedurally, award the item to the bidder with the highest value at a price equal to the value of the second highest bidder.
Variations
There are many variations on this auction system. Sometimes, the reserve price is not revealed. Also, bids may be made with signals instead of being called out. Such signals can include tugging an ear or raising a bidding paddle. Another variation on the English auction is the open-exit auction, where the bidders must announce that they are dropping out of the bidding and they can't reenter.In France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
, when the last bid has been made in an auction for an art object, a member of the state
Sovereign state
A sovereign state, or simply, state, is a state with a defined territory on which it exercises internal and external sovereignty, a permanent population, a government, and the capacity to enter into relations with other sovereign states. It is also normally understood to be a state which is neither...
can say "Préemption de l'état" ("Pre-emption of the state") and buy the object for the highest bid. Some housing cooperatives similarly allow members of the cooperative to pre-empt any buyer of a house constructed by the cooperative. English auctions may end at a specified time, or they may end when no new bids have been made after a period of time.
Candle auction
A candle auction, or auction by the candle, is a variation on the typical English auction that became popular in the 17th and 18th centuries. In a candle auction, the end of the auction is signaled by the expiration of a candleCandle
A candle is a solid block or cylinder of wax with an embedded wick, which is lit to provide light, and sometimes heat.Today, most candles are made from paraffin. Candles can also be made from beeswax, soy, other plant waxes, and tallow...
flame, which was intended to ensure that no one could know exactly when the auction would end and make a last-second bid. Sometimes, other unpredictable processes, such as a footrace, were used in place of the expiration of a candle.
Auction by the candle was known in England by 1641, when it is mentioned in the records of the House of Lords. The practice rapidly became popular, and in 1652, John Milton
John Milton
John Milton was an English poet, polemicist, a scholarly man of letters, and a civil servant for the Commonwealth of England under Oliver Cromwell...
wrote, "The Council thinks it meet to propose the way of selling by inch of candle, as being the most probable means to procure the true value of the goods." Samuel Pepys
Samuel Pepys
Samuel Pepys FRS, MP, JP, was an English naval administrator and Member of Parliament who is now most famous for the diary he kept for a decade while still a relatively young man...
's diary of his London life records two occasions when the Admiralty (his employer) sold surplus ships "by an inch of candle" (November 1660 and September 1662). Pepys also relates a hint from a highly successful bidder, who had observed that, just before expiring, a candle-wick always flares up slightly: on seeing this, he would shout his final - and winning - bid.
Although the candle auction went out of favor in the 18th century, a few candle auctions are still held today as a form of tradition
Tradition
A tradition is a ritual, belief or object passed down within a society, still maintained in the present, with origins in the past. Common examples include holidays or impractical but socially meaningful clothes , but the idea has also been applied to social norms such as greetings...
. In Chedzoy, Somerset, a plot of church land is sold by candle auction once every 21 years. In Tatworth
Tatworth
Tatworth is a village south of Chard in the South Somerset district of the county of Somerset, England. It is part of the Tatworth and Forton civil parish....
, a 6 acres (24,281.2 m²) plot is auctioned by candle once per year. And in Bourne, Lincolnshire
Bourne, Lincolnshire
Bourne is a market town and civil parish on the western edge of the Fens, in the District of South Kesteven in southern Lincolnshire, England.-The town:...
, the 1 acres (4,046.9 m²) White Bread Meadow is auctioned by means of a race between two boys from the town.
A modern variant of the candle auction is used in some online auction systems to prevent auction sniping
Auction sniping
Auction sniping is the process, in a timed online auction , of placing a winning bid at the last possible moment , giving the other bidders no time to outbid the sniper. This can be done manually, or by software...
. In these auctions, a computer randomly selects the time when the auction will end to discourage snipers from attempting to enter bids at the last second.