What is an auction?

Sangeeta has a very special doll. All her friends want that doll, but she does not part with it. Ankita, Vaidehi, and Rama always fight over who will get the doll when Sangeeta is ready to part with it.

One day, Sangeeta decides that she has outgrown the doll.

Ankita, Vaidehi, and Rama – everyone asks Sangeeta for the doll. She doesn’t know who she should sell it to. So, she asks her mother for advice.

Her mother advises her to ask her friends how much they would like to pay for the doll. Then, give it to the friend who pays the highest amount.

Sangeeta really liked this idea. Rama, Vaidehi, and Ankita also felt that this was a fair way to decide who should get Sangeeta’s doll.

What Sangeeta has just done is called auctioning.

How do auctions work?

In an auction, the buyer commissions an auctioneer. The auctioneer can either be a person or a company.

The first step is to value the product.

If the seller agrees with the valuation, the product is added to the catalog of an upcoming auction.

A catalog typically lists the important points about an item.

The catalog is emailed to potential clients.

In an open auction, anyone can enter and bid.

On the day of the auction, each item is presented one by one. People who are interested in buying that item bid on it.

Let’s say Ankita says she will pay 10 rs for the doll. Vaidehi says she will pay 12. Now, Ankita says she can pay 14. This is called outbidding each other.

At the end of each bid, the auctioneer announces the current bid. When no one is bidding any more, the person with the highest bid is announced the winner and the item is put away. The next item is then introduced.

After the auction, the buyer pays for the item. The auction house prepares the sale agreement, that is signed by both parties. This guarantees that the sale is legitimate. The seller also transfers all papers related to previous owners of the item.

The auction house deducts its commission and transfers the rest of the money to the seller.

This is how auctions work.