AJ Auction Pro

Auctions have existed, in some form or other for many years. If, following, we take an auction to involve the exchange of money and goods, then it is clear that auctions could exist until the invention of money However, auctions seem to have been in place in Greece by the 5th century BC, and later became widely used in both Greece and Rome and Greece, while indicates that auctions were a staple of medieval trade around the Mediterranean in the middle ages. Given this long history, it is not surprising that many different forms of auction have been developed, and in this section we will present a classification, based on different auction types that are supported by our AJ Auction OOPD and other existing auction types in the world.

Global Classification:

We can identify a number of different possible features of auctions. The following is a set of features that are broadly recognized in the literature, although the names we have used are not universal — it is the types into which auctions can be divided rather than the terminology that is most important.

• Auctions can be single dimensional, or multi-dimensional.
• Auctions can be one sided or two sided.
• Auctions can be open-cry or sealed bid.
• Auctions can be first price or “n”th price.
• Auctions can be single unit or multi-unit.
• Auctions can be single item or multi-item (combinatorial).

Auction types supported by AJ Auction OOPD:

• Simple Auction
• Fixed Auction
• Dutch Simple type
• Dutch Fixed type
• Dutch Lot type
• Lowest Unique Bid
• Highest Unique Bid

Simple Auction:

A Simple 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 winning. First, we will briefly describe a simple first-price auction protocol with private bids which captures some of the flavor of the more complex version to follow. We assume that all bids are drawn from some ordered set, and that there are n bidders and m auctioneers. We also fix a sufficiently large (64-128 bit) prime number p. All arithmetic will be computed modulo p. Each bidder composes her bid by creating V lists of m integers modulo p. The rule for creating these sets is that:

• If the bidder is willing to pay for the object, then the list of numbers is chosen randomly with uniform distribution subject to the constraint that the sum (modulo p) of all numbers must be non-zero.
• If the bidder is unwilling to pay for the object, then the list of numbers is chosen randomly with uniform distribution subject to the constraint that the sum (modulo p) of all numbers must be zero.

Each auctioneer is sent V numbers by each bidder; the auctioneer is sent the number from each list. The submissions are signed by the bidders, and signed receipts are issued by the auctioneers. The signature by the bidder should be a signature on a hash of hashes of each of the individual values in the list so that the signature can be used to prove a bid at one particular value without revealing the bids at any other values. Strange or non-random bidding behaviors are possible (e.g. being willing to pay but not for i<j).

To determine the winning bid, the auctioneers compute, for each, the sum of the m (one from each bidder) numbers received for that. To determine whether a particular is above or below the winning bid, the auctioneers commit to and reveal their sums for that, and then compute a sum of all these values (which is equal to the sum of all numbers from all bidders for). The sum of all values for a particular is non-zero (with high probability) exactly when at least one bidder is willing to pay. The auctioneers find the highest l for which some bidder is willing to pay, possibly in several stages with a branching search for the highest bid. Once the highest bid is known, the auctioneers can then use the signatures on the bid submissions to prove which bidder is the winner by reassembling all bids for that winning.

This auction has some weaknesses. Most significantly, a coalition of an auctioneer and the highest bidder might uncover some information about the second highest bid. This information would be leaked by the fact that, for all l lower than the highest bid but higher than the second highest bid, the total of all bids would be simply the bid of the highest bidder. The obvious way to avoid revealing these intermediate sums would be to reveal sums one at a time from down and would require a number of rounds linear in the number of bidding points, which is likely to be unacceptably slow. Another weakness is that the work required (both computation and communication) scales linearly with the number of bidding points. For high value auctions, the desirable number of bidding points might be quite large.

We will give an auction in which the work scales only logarithmically with the number of bidding points, which provides complete privacy, and which allows for second-price auctions. It is worth noting that these alterations need not be combined; any subset may be implemented and computation costs will vary accordingly.

Fixed Price Auction:

Fixed Price is a type of online auction selling format a seller would use if he or she wants to sell items at a set price on the auction Web site. This feature enables buyers to purchase the item immediately at a fixed price, as opposed to using the bidding process. There are no bids placed on a Fixed Price style listing, as the price remains constant. Buyers will frequently use the “Fixed” feature when purchasing Fixed Price items. Sellers are required to meet a set feedback score to use the Fixed Price selling format.

These Fixed auctions can toil connections solitary of two ways. You can add a “Fixed” method to a normal auction, essence that buyers can choose either to bid normally or to simply pay the begging charge and avoid the whole bidding process. Some sellers, though, now cut out the auction process altogether and neatly list unitary their items at fixed cost. This lets you wink at all the complications of the auction format and tidily index your items for how much you want them to cede for.

Recently, eBay added a twist to fixed charge auctions: the 'best offer'. This means that buyers can contact you to negotiate a price, which could be a good way to get sell some extra stock at a insufficient overpass. The unrivaled downside to lie low and fixed value auctions is that you pay a scrubby spare fee to use these formats. In general, it is more worth using reserve auctions for higher - priced items and regular profit auctions for lower - priced ones - but remember, that you can concoct the two formats.

Traditional Simple Dutch Auctions:

In the traditional Dutch auction 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 minimum price is reached. That participant pays the last announced price. This type of auction is convenient when it is important to auction goods quickly, since a sale never requires more than one bid. The Dutch auction is named for its best known example, the Dutch tulip auctions; in the Netherlands this type of auction is actually known as a "Chinese auction". "Dutch auction" is also sometimes used to describe online auctions where several identical goods are sold simultaneously to an equal number of high bidders. Economists call the latter auction a multi-unit English ascending auction.

What Does a Simple Dutch auction Mean?

• A public offering auction structure in which the price of the offering is set after taking in all bids and determining the highest price at which the total offering can be sold. In this type of auction, investors place a bid for the amount they are willing to buy in terms of quantity and price.
• A type of auction in which the price on an item is lowered until it gets a bid. The first bid made is the winning bid and results in a sale, assuming that the price is above the reserve price. This is in contrast to typical options, where the price rises as bidders compete.

Instances:

• If a company is using a Dutch auction, potential investors enter their bids for the number of shares they want to purchase as well as the price they are willing to pay. For example, an investor may place a bid for 100 shares at $100 while another investor offers $95 for 500 shares.

Once all the bids are submitted, the allotted placement is assigned to the bidders from the highest bids down, until all of the allotted shares are assigned. However, the price that each bidder pays is based on the lowest price of all the allotted bidders, or essentially the last successful bid. Therefore, even if you bid $100 for your 1,000 shares, if the last successful bid is $80, you will only have to pay $80 for your 1,000 shares.

The U.S. Treasury (and other countries) uses a Dutch auction to sell securities. The Dutch auction also provides an alternative bidding process to pricing. When Google launched its public offering, it relied on a Dutch auction to earn a fair price.

• For example, the auctioneer starts at $2,000 for an object. If there are no bidders, the price is lowered by $100. The object will be sold once a bidder accepts the last price announced by the auctioneer, say $1,500.

Dutch auction (Fixed type):

In the Fixed type Dutch auction, a seller can list multiple, identical items in one listing with a fixed price for each item. There is no bidding involved and the buyer should pay the set price.

For instance, if a seller has 200 iPods, which he would like to sell for $15.99 each. He would list them as with a quantity of 200 and a price of $15.99. Buyers can purchase all available quantity of the item at any time, without any bidding process

Dutch Auction (Lot type):

Dutch Lot Type Auction, the seller will list the items in lot. While posting the Product, the seller should specify the number of items in the lot and the price per each item for that lot. The buyer should buy the item as a lot and should pay for all the items in the selected lot. There is no bidding involved and the buyer should pay for the set price for the selecting lot.

Unique Bid Auctions (Lowest & Highest bids)

In this type of auction users post blind bids and are given a range of prices they can place a bid in, often a capped limit. The highest, or lowest, unique bid wins. For instance an auction is given a maximum bid of 10. If the top five bids are 10, 10, 9, 8, 8 then 9 would be the winner being the highest unique bid. This is a popular online type of auction.

This type of auction requires bidders to place bids that are unique. That is, for a bid to be eligible to win no other bidder can have made a bid for the same amount. Bidders are generally able to place multiple bids and the number of current bids at each amount is typically kept secret.

There are two major variants of unique bid auctions:

Highest Unique Bid:

The bid that is the highest and unmatched when the auction closes is the winning bid. A maximum bid value is usually set at a much lower level than the actual value of the lot.

Lowest Unique Bid:

The bid that is the lowest and unmatched when the auction closes is the winning bid.

A Unique bid auction may run as follows:

If the auction declares the lowest unique bid as the winner, then the player who submitted a bid of $0.06 would win the auction, and would be eligible to purchase the product or service for $0.06, because their bid was the lowest unique bid. If the auction was for the highest unique bid as the winner then the player who submitted a bid of $0.08 would win the auction.

A $30,000 item can be won for pennies this way. However, the true price may be more than a penny as the auction site may charge a fee for the right to bid, or a fee per bid.

In this type of auction the bids of other participants are necessarily secret, although some companies may provide broad guidance following a bid, such as whether the winning unique bid is higher or lower than one's last bid.

Unique bid auctions will typically allow bids to be very precise, in that each bid can be specific to the 'penny'.

Virtually all instances of unique bid auctions are heavily dependent on the use of technology, in that they are either run solely using mobile technology (e.g. bidders submit their bids via text messages) or they are on-line auction sites, or both.

Other Kind of Auction terms & Instances:

The terminology used by vendors and auction sites is often inconsistent. In our consulting practice, we have found the following helpful in sorting out some of the confusion.

English Auction:

This is an open, ascending auction where each winner pays his/her bid. When people speak of auctions, they usually mean this one. Sotheby's and Christie's use this method for auctioning fine art. At most Internet auction sites, if there is no indication otherwise, this is the method used. The method works with both Single Unit and Multiple Unit auctions.

Single Unit Auction:

Only one item is offered for sale. If a case of coffee mugs is being auctioned, and bidders have to bid on the whole case, then this would be a single unit auction. If bidders can buy individual coffee mugs, then this is a Multiple Unit auction.

Multiple Unit Auction:

More than one of an item is offered for sale. If a case of coffee mugs is being auctioned, and bidders have to buy the whole case, then this would be a Single Unit auction. If bidders can buy individual coffee mugs, then this is a multiple unit auction. In multiple unit auctions, most sites will let bidders bid on more than one item ("I'd like to buy four coffee mugs.") However, in the auction theory literature, most papers are written with the assumption that each bidder can only bid on one item. If the items being auctioned are all identical, then it is a homogenous multiple unit auction. If the items are basically the same, but have slight differences (scratches, perhaps), then the auction is heterogeneous.

Reserve Price:

The minimum price that the seller will accept. An auction is not required to have a reserve price, and theoretically, any auction can have a reserve price. If the bidders know the reserve price, it is a posted reserve price; otherwise it is a secret reserve price.Proxy English Auction: On the Internet many auction sites have an English auction with a "robot" or other bidding agent that automatically increases a bidder's bid up to the bidder's predetermined maximum.

Sealed Bid Auction:

This is a closed version of the English auction. All bidders submit their sealed (secret) bids. When the bidding period is over, all the bids are opened. The high bidder wins and pays what he/she bid. The strategy for a sealed bid auction is different from the strategy in an English. In Multiple Unit sealed bid auctions, the bids are ranked from high to low, the highest bidders win and each pays what he/she bid.

Yankee Auction:

Classic Dutch Auction:

Dutch Auction:

This refers to many different auction types. To the financial community and to many Internet auction sites, this refers to a Vickrey auction. To the auction theorist, this is a Classic Dutch auction. Some sites use this term to refer to any descending price auction, including Reverse Auctions.

Vickrey Auction:

In a Multiple Unit auction, the highest bidders all win, but they each pay the lowest winning price. The Vickrey is sometimes called a uniform auction, because each winner pays the same as every other winner. This contrasts with the English Multiple Unit and Sealed Bid Multiple Unit auctions that are called discriminatory because each winner could pay a different price.

• In a Single Unit Vickrey auction, the highest bidder is the winner, but he/she pays the next highest price (the highest losing bid). In its pure form, this method is seldom seen outside of auction theory literature. A Vickrey auction is sometimes referred to as a second-price auction, because the winner pays the second highest price bid, rather than the highest.
• In a modified form, this the method used on eBay for single unit auctions. Instead of the winning price being the highest losing bid, it is the highest losing bid plus a minimum bid increment.
• Vickrey auctions on the Internet are sometimes conducted as open auctions (all bidders can see all bids) and sometimes closed. In auction theory, the Vickrey method is always closed.

A Japanese auction is a special form of English auction where once bidding starts, no new bidders are allowed to participate and when the price rises each bidder must either drop out or indicate that they are continuing to bid. Japanese auctions are usually seen in auction theory. Although poker is not a true Japanese auction, it functions similarly: once everybody antes, no new players may jump in; when somebody raises, everybody must either fold (drop out) or match the raise.The term Chinese auction is used to describe three different types of transactions. Investment bankers use the term to describe a "shotgun" style force-out. More information on this type of Chinese auction is available at force-out consulting.A second style of Chinese auction is commonly used at fund raising events. The bidders buy (or win) tickets - I remember playing casino games at one fundraiser and my chips were exchanged for tickets. During the "auction" phase all items being auctioned are put on display with a basket (or jar or whatever) in front of each item. Bidders take their tickets and place them in any combination of baskets that they choose. After all tickets are deposited, a winning ticket is randomly drawn from each basket. The more tickets you put in to a single basket, the more likely you are to win that particular item.The third style of Chinese auction is most commonly used at gift exchanging parties. In this "auction" the first person picks a gift from a pile an opens (unwraps) it. The second person can either take the first person's gift or can pick a gift from the pile. The third person can take the first or second person's gift or pick one from the pile, and so on. There are numerous variations of rules concerning how many times a person can have a gift taken away, how many times a gift can be taken, etc.

Winner's Curse:

In a Single Unit auction, it is the difference between the amount the winner paid and the next lower bid. In Multiple Unit auctions, it can be the difference between a winning bid and the lowest winning bid or a winning bid and the highest losing bid. The meaning is usually clear from the context.

Pay-Your-Bid Auctions:

An auction where the winning bidders pay the amount they bid. The English, Sealed Bid and Classic Dutch are all pay-your-bid auctions. The Vickrey is not.

Reverse Auction: This term is used inconsistently. In most cases and in auction theory, this refers to a one-buyer, many-seller auction (as opposed to the traditional one-seller, many-buyer auction). Some sites use this term to refer to any descending price auction, including the Classic Dutch.

Aggregate Demand Auction:

This is not a true auction, but does fit in the overall category of dynamic pricing. (This is the Mercata model.)

• The seller posts an item for sale and a price.
• Buyers indicate their willingness to buy at that price.
• When enough items are sold (as defined by the seller beforehand) at the initial posted price, the price drops a specified amount.
• Buyers willing to purchase at this new, lower price now do so.
• When enough items are sold, the price drops again.
• This process continues until the buying period is over.

Negotiated Price Auction:

This is not a true auction, but appears in dynamic commerce situations. (This is the Priceline model.)

• A seller posts an item for sale
• A prospective buyer makes an offer
• If the seller accepts, then a trade is done
• If the seller chooses not to accept, he/she can make a counter-offer or not

This process goes back and forth until a trade is consummated or one party chooses not to counter-offer.

Exchange:

This is a many-buyer, many-seller auction. Some examples are NASDAQ, the New York Stock Exchange and the Chicago Board of Trade.