Volume 4, issue 2, 2025
40
CURRENTLY AVAILABLE 4 FORMATS OF AUCTION TRADING (ENGLISH,
DUTCH, SEAL FIRST PRICE , VICKRY) WIDELY DISTRIBUTED IN THE WORLD
AND THEIR PROS AND CONS IN THEIR MANAGEMENT MECHANISM
Khalmirzayev Ozodbek Abdurasulovich
ADU researcher
Abstract:
Auctions are a very popular form of trade in many countries today, particularly in
Europe, America, China, Japan, and Arab countries. In them, an object is put up for public sale
and a kind of competition is organized among buyers to buy this object, and whoever pays the
most money wins the sale.
This article mainly discusses the 4 formats that are currently common in the world. (English,
Dutch, sealed first price, vickry) auction sales, their positive and negative aspects are covered.
Keywords:
English auction, Dutch auction, first sealed auction, Vickrey auction, first auction in
history, auction sale, auctioneer, auctioneer, auctioneer
, auction winner
.
Auction trading has been developing on a global scale for several hundred years, as a result of
development, certain formats have emerged, in addition, the type of auction, design, mechanism
and rules of procedure have been formed, all auction formats have certain rules and forms. That
is, English, Dutch, sealed first price auction, Vickry auction formats all have different individual
characteristics and express their own content and essence. The word auction (Latin auction)
means “special auction markets, the sale of goods to interested buyers”.
Currently, there are 4 formats in the world. (English, Dutch, sealed first price, vickry) auction
sales are common, and they consist of:
Dutch auction format
–
in which the highest maximum price of the object being sold is
determined and announced as the starting price. There are open and closed types of auction sales
in this format, depending on the type of sale (Figure 1):
- open type means that bidders can see each other's bids and the number of participating bidders
during the auction.
- closed type, in which auction participants cannot see each other's bids and the number of
participating bidders during the auction, this is mainly
done when using automated mechanisms,
that is, when bidders place bids by pressing buttons located on the rostrum.
In addition, there are open and closed forms of the above types,
according to the composition of
the participants (Figure 1):
An open form is a trading mechanism in which everyone can participate.
A closed form is a trading mechanism in which only persons specially invited by the auction
organizer can participate.
During the auction, the starting price of the object gradually decreases
until the bids are reduced
to the price agreed to by the first buyer who expressed interest in purchasing the object.
This auction format gets its name from its popularity in the Netherlands. Its distinctive feature is
that it is a wholesale auction in which the seller can offer several items at once and conduct a
quick sale.
(Figure 1)
Holland Auction
Open
type
Closed
type
Volume 4, issue 2, 2025
41
The Dutch auction format is divided into 2 different types of sales, and the types are also divided
into 2 different forms.
The essence of the Dutch auction is that the auctioneer first sets the maximum price, which is
displayed on a screen installed in the auction hall. If none of the buyers expresses a desire to buy
the lot at this price, the auctioneer begins to lower the price. The first buyer of the object presses
the button in front of him, which stops the price decrease on the screen, and the participant
number of this buyer registered with the auction organizer appears on the screen. The owner of
this number is considered the buyer of this lot. This method of holding an auction significantly
speeds up the auction and allows you to sell up to 600 lots per hour
.
English auction format
- this format is known and popular all over the world, one of the
specific definitions of this auction is that it is called an open auction (bids of the participants in
the auction are known to each other during the auction process). There is only an open type of
auction in this format, according to the type of sale (Figure 2). There are 2 types of open English
auctions, called direct (classical) and reverse (reverse, abbreviated), according to the method of
sale (Figure 2):
The direct (classic) style of English auction is considered to be a pure English auction.
The so-called reverse (reverse, abbreviated) English auction is actually an open type of Dutch
auction, which means that the so-called reverse (reverse, abbreviated) English auction was
created as a result of the combination of Dutch auction and English auction.
In addition, there are open and closed forms of the styles, according to the composition of the
participants (Figure 2):
An open form is a trading mechanism in which everyone can participate.
A closed form is a trading mechanism in which only persons specially invited by the auction
organizer can participate.
(Figure 2)
The open type of the English auction format and its 2 different styles, and the division of styles
into 2 different forms are reflected.
Direct
(classical) style
of the English auction
, in open and closed forms
according to the
composition of the participants, the starting price of the object gradually increases and the offers
https://ru.wikipedia.org/wiki/%D0%93%D0%BE%D0%BB%D0%BB%D0%B0%D0%BD%D0
%B4%D1%81%D0%BA%D0%B8%D0%B9_%D0%B0%D1%83%D0%BA%D1%86%D0%B8
Open type
Direct (classic)
style
Reverse (reverse,
reduction) style
Open
form
Closed
form
Open
form
Closed
form
Open
form
Closed
form
Open
form
Closed
form
English auction
Volume 4, issue 2, 2025
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are announced to the participants. Prices gradually increase at the
auctioneer's suggestion or at
the request of the participants. Participants have the opportunity to revise their offers depending
on the actions of competitors. The participant who offered the highest price wins. A participant
who does not want to buy at the price set by the auctioneer signals or informs the auctioneer that
he has left the auction. The auction continues, the price offered to the participant who has left the
auction, is offered to other participants in the auction until there is one winning participant. The
minimum starting price is formed by the supplier, seller or owner of the object, and setting this
price above the market price discourages potential buyers from participating in the auction. All
auction participants may participate in the auction in person or through their representatives.
Sometimes, in auctions where representatives participate, the representative contacts the
participant via communication (telephone, internet) to notify of price changes and request their
reaction.
The reverse
(reverse, reduction) method of the
English
auction
is
actually an open type of the
Dutch auction, that is, the so-called reverse (reverse, reduction) method of the English auction
was formed as a result of the coordination of the Dutch auction and the English auction.
In open
and closed forms, depending on the composition of the participants,
the maximum price of the
auction object
gradually decreases during the auction. The participants in the auction may not be
bidders, but rather offerors, sellers, suppliers of goods and owners of the object. It is gradually
reduced until the last seller remains who agrees to sell the object or provide services at the price
offered by the auctioneer (auction organizer).
All participants in the auction may participate in
the auction in person or by their representatives. Sometimes, in auctions where representatives
participate, a representative contacts the participant via communication (telephone, Internet) to
notify of price changes and ask for their reaction.
First-Price Sealed Auction Bidding Format
- In this type of auction, bidders submit sealed
bids, and the highest bidder wins the item at a price equal to their bid. This auction format
encourages bidders to bid their true price because if they win, they will have to pay what
they bid.
There is only a closed type of auction in this format, according to the type of auction (Figure 3).
The closed type is when auction participants, when submitting bids through envelopes during the
auction and in the pre-auction period, cannot see each other's bids and the number of
participating participants.
In addition, there are open and closed forms of the above types,
according to the composition of
the participants (Figure 3):
The open format is a trading mechanism where anyone can bid.
A closed form is a trading mechanism where only individuals specifically invited by the auction
organizer can bid.
(Figure 3)
https://ru.wikipedia.org/wiki/%D0%90%D0%BD%D0%B3%D0%BB%D0%B8%D0%B9%D1
%81%D0%BA%D0%B8%D0%B9_%D0%B0%D1%83%D0%BA%D1%86%D0%B8%D0%B
Closed type
Open form
Closed form
First price sealed auction
Volume 4, issue 2, 2025
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A sealed bid auction format, auctions are held in both closed and open formats. organizational
work
However, this format can lead to a winner's curse, where the winner may end up paying more
if their bid is higher than that of other bidders.
The winner's curse is a phenomenon in auction theory in which the winning bidder tends to
overpay for an item relative to its true value. This occurs when bidders have imperfect
information about the value of the item and base their bids on it. Understanding the winner's
curse is crucial for bidders to avoid overpaying and for auctioneers to set appropriate starting
The Vickrey auction format
, or sealed second-price auction (SBSPA), is a type of sealed
auction. Bidders submit written bids without knowing the bids of other bidders. The highest
bidder wins, but the price paid is the second highest bid. This auction format is strategically
similar to the English auction format and encourages bidders to bid their true value. There is only
one closed auction format, which is classified by type of auction ( Figure 4). A closed auction is
one in which bidders cannot see each other's bids or the number of bidders participating during
the auction and during the pre-bid bidding process.
In addition, there are open and closed forms of the above types,
according to the composition of
the participants (Figure 4):
The open format is a trading mechanism where anyone can bid.
A closed form is a trading mechanism where only individuals specifically invited by the auction
organizer can bid.
(Figure 4)
Vickrey auction format, auctions are held in both closed and open forms. organizational work
Example of a Vickrey auction :
Six people are bidding for antiques at a Vickrey auction. Each person states the maximum
amount they are willing to pay for the antiques, as shown below. Who will win the Vickrey
auction, and what will be the price paid for the antiques?
Physical person A his/her own the most high offer 103 dollars that it was because of who
increased in trade win However, A person the most high offer price he/she/it does n't
Closed type
Open form
Closed form
Vickrey Auction
Volume 4, issue 2, 2025
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pay second the most high the price pays. Our
in our example she is only 101 dollars
pay
need It will be.
because of, A of the person to pay
maximum ready 103 dollars
organization does and she is antique thing for only 101 dollars pays. Offer price 2 dollars
excess.
Physical individuals their own to pay from readiness higher offer that they do understanding
for above example our expansion possible. Reminder We are dead, Vickrey who increased in
trade participant maximum to pay from readiness high or low the price offer to do for no how
incentive no
For example:
Is the offer above the maximum willingness to pay?
If individual B's maximum willingness to pay is $101 and he bids $105, he is at risk of paying a
higher price than he is willing to pay (this risk only arises if the first-place bidder's bid is higher
than the individual's maximum willingness to pay).
In this case, the first-place winner would be Individual A, whose price would be $103 - a $2
shortfall from Individual B's maximum willingness to pay.
Is the bid below the maximum willingness to pay?
If Person A has a maximum willingness to pay of $103 and bids a low price of $100, he is at risk
of losing the bid at the price he is willing to pay. (This is considered a risk because it only occurs
if another bidder places a bid higher than the low bid.)
In this case, Person B wins the auction for $101 and only has to pay Person C's price of $100.50
If Person A rejects the bid, he loses the bid and the winner only has to pay $100.50 - which is
less than Person A was willing to pay.
In a Vickrey auction, bidders are unaware of other bidders' bids. The winning bidder does not
pay the winning bid price - they pay the second highest price.
In such an auction, individuals are encouraged to bid their maximum willingness to pay. In the
absence of a deal, there is no incentive to bid above or below an individual's maximum
willingness to pay.
CONCLUSION
Our conclusions from our research are as follows:
1.
(Applies to all auction sales formats and sales of non-state objects).
It is natural for
the buyer to want to purchase the object put up for auction in a condition free of unnecessary
expenses during the process of visiting and studying it. As a result, the owner of the object and
the buyer reach an agreement, and the owner withdraws the object from the auction, and directly
signs a purchase and sale agreement with the buyer. As a result, the auction organizer has no
financial interest, which leads to the failure of the auction.
2.
(Applies to all auction sales formats and sales of state and non-state objects)
. Buyers
who want to buy an object at an auction must pay a deposit of a certain percentage of the starting
price of the object, and in many cases, when 2 or more buyers participate in the auction, a sales
division is introduced as a rule. In most cases, after the buyer pays a deposit for himself, he is
forced to find an artificial competitor for himself and pay a deposit for him, considering the
possibility that if only one participant participates in the auction, the sale will not take place,
which requires additional costs and time from the buyer of the object. This situation is
characteristic of the English format auction.
3
https :// corporatefinanceinstitute . com / resources / economics / vickrey - auction /
Volume 4, issue 2, 2025
45
3.
(All auction formats and regarding the sale of state and non-state objects).
In the
auction process, collusion among bidders occurs when a buyer attempts to purchase an item by
artificially lowering the price, or fails to pay for an item sold at an auction at a higher price due
to artificially inflating the price and manipulating the price.
RECOMMENDATIONS FOR ELIMINATION
Our recommendations based on our research are as follows:
1.
(Related to the sale of non-state objects)
A situation that can occur in any type of auction
format, that is, the buyer naturally wants to purchase the object put up for auction in a state free
of unnecessary
expenses during the process of visiting and studying it. As a result of mutual
agreement between the owner of the object and the buyer, the owner of the object withdraws the
object from the auction and directly signs a mutual purchase and sale agreement with the buyer,
which does not bring financial benefits to the auction organizer, and leads to the auction not
developing. To eliminate this situation, when concluding a contract between the auction
organizer and the seller, that is, the owner of the object, the clauses of the contract should reflect
that if the object is not sold at the auction, the expenses incurred by the auction organizer for
advertising and promotion must be covered by the seller.
2.
(Regarding the sale of state and non-state objects). A
situation that can occur in any type
of auction format, that is,
buyers who want to purchase an object at an auction must pay a deposit
in the amount of a certain percentage of the initial price of the object and then participate in the
sale. Also, in the event that 2 or more buyers participate in the auction, the sale is often
determined as a sales rule, in most cases the buyer, after paying the deposit for himself, is
expected to participate in the sale alone, and in this case, taking into account the possibility that
the sale will not take place, is forced to find an artificial competitor for himself and pay a deposit
for him, which requires additional costs and time from the buyer of the object. To eliminate this
situation, if only one buyer participates in the auction, it is considered expedient to sell at the
minimum sale price set by the seller or owner.
3.
(Related to the sale of state and non-state objects). A
situation that can occur in any type
of auction format, that is, during the auction process,
there are cases of artificially inflating the
price (manipulation) and non-payment of money among the participants . The only way to
eliminate these situations is to determine the amount of the deposit, deposit, paid to the account
of the auction organizer by the participants before participating in the auction, in the contract
concluded with the participant, at a higher percentage based on the assignment, and to have a
larger deposit, deposit. In the event that the participant artificially inflates the price of the object
at the auction, the condition of non-return of the deposit should be included in the contract clause.
Also, in cases where participants who have applied to participate in the auction sale of an object
but do not participate in the auction process are observed, it is necessary to include a clause in
the contract concluded with the participant, which provides for the withdrawal of the object from
the auction organizer, considering it a case of collusion between the participants.
References :
1. Ayupov RH Fundamentals of the Digital Economy: Textbook, – T.: TMI, 2020. – 575 P.
2. Shodmonov Sh. Economic Theory: Textbook , – T.: “LESSON PRESS”, 2021. – 768 P.
4.
https://ru.wikipedia.org/wiki/%D0%90%D0%BD%D0%B3%D0%BB%D0%B8%D0%B9%D
1%81%D0%BA%D0%B8%D0%B9_%D0%B0%D1%83%D0%BA%D1%86%D0%B8%D0%B
5.
https://ru.wikipedia.org/wiki/%D0%93%D0%BE%D0%BB%D0%BB%D0%B0%D0%BD%D
