00:01
Here we're discussing any five types of auctions used for the procurement of goods and services.
00:05
One is an absolute auction.
00:13
In an absolute auction, the highest bid wins regardless of the price.
00:33
This is a traditional auction we think of that we've seen in tvs or movies and things like that.
00:39
And because the highest bid wins regardless of the price, this can lead to things being sold for less than you want them to because maybe the bid only goes up to $150 and you were hoping to get $300 for that item.
00:51
But it can also mean that things actually go for more than they're actually valued at.
00:56
An item could be valued at $500, but because two people get in a bidding war, maybe it sells for $750.
01:05
In fact, the typical result in an absolute auction is more money for the seller due to the competitive nature of bidding.
01:13
Another type is minimum bid auction.
01:23
Minimum bids auction begin at a minimum price established by the seller.
01:45
So this is like a price floor that you can't go under.
01:48
So instead of starting at say zero and seeing having that first bid, maybe being $20, you might start at 100 or $200 because that's the lowest you're willing to let go of that item for.
02:01
If you've ever used ebay, this is that reserve price if you've ever seen that there.
02:06
And the bidding will start lower than that, but the item doesn't actually sell unless that reserve price is hit.
02:14
That's a form of minimum bid auctioning.
02:18
Another type is reserve auction.
02:25
A reserve auction allows the seller to accept, reject, or counter the winning bid for any reason.
02:57
So maybe the bid ends up at $150, but you were really hoping to get $300 out of it.
03:06
So instead of accepting that bid of $150, you could reject it because you wanted at least $300, or you could counter with $300, and you might meet somewhere in the middle.
03:21
Ebay uses this as well in its best offer format, where you can submit an offer for an item and then the seller gets that offer.
03:34
And maybe the original listing price as a buy it now was $50...