Auction

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DEFINITION of 'Auction'

A system where potential buyers place competitive bids on assets and services. The asset or service in question will sell to the party that places the highest bid. In most cases, sellers will pay a listing fee to the auctioneer, regardless of whether the item actually sells for the desired price.

BREAKING DOWN 'Auction'

For example, Google used a modified form of auctioning called the dutch auction when it issued its IPO. In this form of auction, prospective buyers submitted bids that included the number of shares desired and what the bidder was willing to pay for them. After the auction ended, the underwriters sorted through bids in order to determine the minimum priced bid they would accept from buyers. The IPO was priced at $85.

The internet has increased the amount of exposure that auctions now have, and bidders no longer have to be physically present to participate. Online marketplaces such as eBay connect buyers and sellers worldwide by allowing individuals to submit their bids (or list their products) online and send payment electronically.

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RELATED FAQS
  1. How can I invest in tax liens?

    An individual can invest in tax liens by identifying available liens and then participating in auctions where property tax ... Read Full Answer >>
  2. What kind of assets can be traded on a secondary market?

    Virtually all types of financial assets and investing instruments are traded on secondary markets, including stocks, bonds, ... Read Full Answer >>
  3. How can I invest in electronic retailing (e-tailing)?

    Electronic retail is one of the fastest growing segments of the economy. Every year, more people are choosing to purchase ... Read Full Answer >>
  4. How do you calculate a reverse split using Excel?

    A reverse stock split is a corporate action a company may take to meet exchange requirements. A reverse split reduces the ... Read Full Answer >>
  5. What countries represent the largest portion of the global retail sector?

    The United States and China are the world's largest and second-largest retail markets, respectively, by total retail sales. ... Read Full Answer >>
  6. Why would a company decide to utilize H-shares over A-shares in its IPO?

    A company would decide to utilize H shares over A shares in its initial public offering (IPO) if that company believes it ... Read Full Answer >>

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