English Auction

Published by Mario Oettler on

The English auction is the most prominent auction type. Here, the auction starts at a low price, and participants issue bids increasing the price step by step. Bids are issued open. So every other participant can see what the actual highest bid is. Depending on the rules, participants can increase the price individually or in determined steps.

If no participant wants to issue a higher bid, the auction is closed and the bidder with the highest bid receives the item. He has to pay the highest bid.

The strategy for the participants is to bid up to his maximal willingness to pay. If the price goes higher, bidders that don’t want to pay that much should stop bidding.

Bid open/sealedOpen
Bids increase or decreaseIncrease
Bid orderSuccinct bids (minimal steps possible)
WinnerBidder with the highest bid
Final priceHighest bid
End of auctionNobody wants to overbid the highest bid
StrategyBidding to the limit

Determining the End of an English Auction

In an English auction, there is one problem determining that no one wants to submit a higher bid anymore. In the classic case, the auctioneer counts from three to one and then closes the auction and announces the winner. In this approach, a fixed time (let’s say three seconds) after each bid is waited. During this short period, everybody has the chance to submit a higher bid. This works well with small and closed groups. But for online auctions, this is difficult because of the network latency.

Another approach is to have a fixed closing time. As soon as this time is reached, no new bids can be submitted. While this is convenient, it allows “sniping”. Sniping means submitting bids at the very last second. This prevents other participants from reacting to the higher bid.

A remedy is a so-called candle auction. Here, the closing time is set randomly and not revealed to the participants.