English auction (open ascending price auction) is the oldest and the most familiar type of auctions forasmuch it generates higher revenues to the seller than other auction forms. Most often, these types of auctions take place in auction houses and it's used for selling antiques, properties, artworks or animals (thoroughbred racing horses are the most-sold animals)(P. Milgrom 2004, p. 239-242).
Conduct of the English auction
The form of the tender - the English auction - is as follows(V. Krishna 2009, p. 180):
- The auctioneer starts the auction by quoting the asking price (the lowest amount of money seller accepts),
- Bidders indicate by raising hands with numbered cards (increasingly electronically), their demand at that price. During the English auction, the rule applies- each subsequent price must be higher than the previous one,
- As the bid increases, the auctioneer raises the price (explicitly for all participants),
- The auction ends, when the bidders cannot beat the current price. If the price does not exceed the minimum price set by the seller, the auction item will not be sold.
Advantages of the English auction
The advantages of an English auction are(K. McCabe, S. Rassenti, L. Smith 1990, p. 2):
- Efficient and quick sales method (particularly important when selling unstable, perishable goods),
- A way to prevent market monopolization,
- Generates higher revenues for the seller,
- Auctions are open for all buyers,
- Auction items are fairly and objectively priced,
- The certainty of the authenticity of the item being purchased,
- Overt conduct of the auctions- prices proposed by other bidders are known by every auction participant.
Disadvantages of the English auction
The disadvantages of an English auction are(K. McCabe, S. Rassenti, L. Smith 1990, p. 3):
- Lack of guarantees regarding the sales (if buyers are unable to exceed the current price),
- Possible collusion between participants,
- Limited range of products,
- Elimination of smaller entities,
- Those interested in buying a specific object must compete for it, and this often means that the amount obtained exceeds expectations.
- Chesher A., Rosen A.M. (2017), Incomplete English Auction Models with Heterogeneity London, p. 3-5
- Hernando-Veciana A., Michelucci A. (2011), Second Best Efficiency and the English Auction Madrid, p. 2-5
- Miller J. (2014), From English to First-Price Sealed Bid: Empirical Assessment of the Change in Auction Type on Experienced Bidders p. 2-8
- Vartiainen H. (2013), Auction Design without Commitment Milan, p. 4-8
- Milgrom P. (2004), Putting Auction Theory to Work, p. 239-242
- Krishna V. (2009) Auction Theory, p. 180
- McCabe K., Rassenti S., Smith L. (1990) Auction Institutional Design: Theory and Behavior of Simultaneous Multiple-Unit Generalizations of the Dutch and English Auctions , p. 2
- McCabe K., Rassenti S., Smith L. (1990) Auction Institutional Design: Theory and Behavior of Simultaneous Multiple-Unit Generalizations of the Dutch and English Auctions , p. 3
Author: Aleksandra Wilczyńska