The intro to the video above is worth two minutes of your time...
Types of auctions (source)
- First-price sealed-bid auctions in which bidders place their bid in a sealed envelope and simultaneously hand them to the auctioneer. The envelopes are opened and the individual with the highest bid wins, paying the amount bid.
- Second-price sealed-bid auctions (Vickrey auctions) in which bidders place their bid in a sealed envelope and simultaneously hand them to the auctioneer. The envelopes are opened and the individual with the highest bid wins, paying a price equal to the second-highest bid.
- Open ascending-bid auctions (English auctions) in which participants make increasingly higher bids, each stopping bidding when they are not prepared to pay more than the current highest bid. This continues until no participant is prepared to make a higher bid; the highest bidder wins the auction at the final amount bid. Sometimes the lot is only actually sold if the bidding reaches a reserve price set by the seller.
- Open descending-bid auctions (Dutch auctions) in which the price is set by the auctioneer at a level sufficiently high to deter all bidders, and is progressively lowered until a bidder is prepared to buy at the current price, winning the auction.
