What eBay is. Any sale process is fundamentally an auction, in the sense that buyers make various offers and the seller (usually) takes the highest bid. However, the traditional auction - the kind with some guy saying incomprehensible things at a speed reminiscent of a benzedrine-addicted hummingbird, punctuated with occasional gavel bangs - represents the typical selling process amplified by a short-term intensity and a certain competitive edge.
There are various types of auction. There's the live auction, which can include the stereotypical fast-talking auctioneer and people shouting out their bids. It might also resemble the scene from every art heist movie where the auctioneer suggests prices and staid well-dressed people signify their bids by waving paddles in the air.
The live auction, what we think about when we think about an auction, is also sometimes called an English auction.
There's also sealed bid auctions. Here, buyers submit secret bids in sealed envelopes and people don't know the other bids. The highest offer from the sealed bids wins the auction.
Then, of course, there's the online auction, the type made popular by eBay.
Auctions come in highly specialized flavors as well.
There's the Dutch auction, which has the auctioneer start with a very high price and lower it until someone says they are willing to buy it (we're guessing the Dutch don't like to waste time and would rather avoid direct competition).
There's the Japanese auction, which proceeds like a typical auction, but with certain requirements on the bidders. For instance, once things get going, no new bidders can jump in and the action proceeds in rounds, with the bidders either deciding to press on or drop out with each subsequent round. Based on this, we're guessing spelling bees are big in Japan.
Related or Semi-related Video
Finance: What is a thin market?13 Views
Finance allah shmoop what is thin market peahen happens when
few stocks are trading on bonds to actually thin is
illiquid thin is when there just aren't a lot of
buyers at the given price levels Thin is when trading
volumes are described by the kindly wise cnbc commentators as
being anemic Thin is when the headlines ask where have
all the stock buyers gone Long time passing bob dylan
i'll go ask your parents finn is it Well not
this guy Fat is high volumes lots of cash being
put to work Buying securities fat is big demand to
buy a big supply of supply Fat or liquid markets
are generally driven by cash being put to work which
either came from investors who simply saved their pennies to
then deploy them in the market's taking on more risk
by being exposed to more volatility and generally speaking hi
liquidity even in a world where the stock market is
flat is generally perceived as bullish or positive voting in
the future of stock market values Yeah so what does
all that mean Money being put to work is good
It adds liquidity It means people are hopeful optimistic lots
Of opinions Then goto work assessing the upside and downside
of the market such that the gumball estimate effect is
in place And if you didn't go to third grade
in the last decade the gumball estimate game revolves around
the idea that if many opinions estimate the number of
gumballs in this big fish tank those numbers get averaged
and way more often than not The average guesses in
fact very close to the actual number of gumballs crushing
down on the innocent guppies and other goldfish below The
same holds true in the stock market where the aggregation
of many opinions usually makes for better decisions or at
least more accurate estimates And in the case where a
market suddenly grows thin it means that a lot of
educated well heeled invest astors have been spooked by the
notion of taking on risk in their portfolios by taking
their safe cash and risking it in the market So
they d risk or simply then keep cash in their
wallets Not wanting to put it to work until better 00:02:15.065 --> [endTime] signs come from you know on high
Up Next
What is an Auction Market? Auction markets are the common stock exchanges. They allow buyers and sellers to enter bids and offers; trades occur whe...
What is a Dutch Auction? A Dutch Auction is either one where closed quantity and price bids are entered and the price is set at the highest price t...