Auction

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Dealer Market

    A financial market mechanism wherein multiple dealers post prices ...
  2. Bidding War

    A situation where two or more buyers are so interested in an ...
  3. Sheriff's Sales

    A term used to refer to distressed public property auctions. ...
  4. Reverse Auction

    A type of auction in which sellers bid for the prices at which ...
  5. Ask

    The price a seller is willing to accept for a security, also ...
  6. Consignment

    An arrangement whereby goods are left in the possession of another ...
Related Articles
  1. Investing Basics

    Stock Basics Tutorial

    If you're new to the stock market and want the basics, this is the tutorial for you!
  2. Options & Futures

    Getting To Know The Stock Exchanges

    Here are the answers to all the questions you have about stock exchanges but are too afraid to ask!
  3. Bonds & Fixed Income

    Auction Rate Securities: Bidding On The Long Run

    These investments do better with a long-term horizon. Should you buy them before they're going, going, gone?
  4. Economics

    What Is Happening To The BRIC Economies?

    Ten years ago, it was about the BRIC countries –Brazil, Russia, India, and China, and it was thought that capitalizing their resources would elevate them.
  5. Investing Basics

    Five Successful Investing Strategies

    The secret to investing is that there is no secret. Success is all about knowing yourself, getting the basics and using both to make the right choices.
  6. Investing Basics

    What is the difference between an IPO and a seasoned issue?

    Learn how companies issue IPO securities when they first go public and seasoned issue shares if they sell more shares in the secondary market.
  7. Investing Basics

    What is the difference between a company's outstanding shares and its float?

    Understanding share counts, including outstanding shares relative to float, is an integral part of determining whether or not to invest in a particular company.
  8. Investing Basics

    What is the difference between authorized shares and outstanding shares?

    Calculating financial ratios can help investors understand a company's financial position, but only when a knowledge of various terms is at the foundation.
  9. Investing

    Top 10 Largest Global IPOs Of All Time

    We have compiled a list of the top 10 largest IPOs of all time. The results may surprise you.
  10. Trading Strategies

    Know the Forces At Play Behind The Buy/Sell Cycles

    Weekly Stochastics uncovers patterns of buying and selling pressure that can be predicted and capitalized upon by observant investors and traders.

You May Also Like

Hot Definitions
  1. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  2. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  5. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  6. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
Trading Center