An auction is an event in which goods or property are sold to the highest bidder. By being open to the public, an auction ensures a wide range of bids, and sometimes items at auction can fetch surprisingly high prices. The bidders, in turn, create their own market, determining on an individual basis how much they want to pay for an item, rather than having prices dictated by the seller. There are a number of types of auctions performed around the world.
In a basic so-called English auction, an item is introduced to the crowd and members of the public bid on it, slowly raising the price until everyone bows out, leaving a winner of the auction who pays the price he or she bid. The auction is managed by an auctioneer, someone who keeps an eye on the bidding and determines the ultimate winner. In some cases, the seller may set a minimum bid, ensuring that the item will not sell below a certain price. Famous auction houses like Sotheby's specialize in this type of auction.
In another type of auction, a Dutch auction, the auctioneer starts at a set price and then lowers it. Members of the crowd bid then they hear prices that they like. Dutch auctions may also be used to sell multiple units of the same item to a big crowd; for example, someone selling off lots of hay might allow all members of the crowd to pay the same price, once a fair bid has been reached.
In some cases, people at an auction may submit sealed bids which are opened simultaneously. The winner of the auction is the person with the highest bid. In another variation on the basic auction, the silent auction, people wander around a room looking at items, and they write their bids on accompanying sheets of paper. Participants can see other people's bids, and they may choose to try to counter another person's bid if they particularly want the item in question. At the end of a set period, the person with the highest bid is named the winner.
At most auctions, people can bid remotely by giving the auctioneer a letter indicating their intent to bid and the maximum amount which they are willing to bid. Some auction houses specifically cater to this, keeping a number of people on staff who stay on the phone with customers during auctions, bidding as proxies for their clients. In other cases, an auction may be carried out entirely remotely, as is the case with online auctions.
Generally, a bid is considered legally binding. By bidding, a participant agrees to pay the amount which he or she bids. In high-profile auctions, bidders may be asked to deposit money in escrow accounts, or to provide other proofs that they are capable of paying for the items they bid on.