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Bidding and Its Types: Beginner’s Guide

UTC by Beatrice Mastropietro · 9 min read
Bidding and Its Types: Beginner’s Guide
Photo: Depositphotos

Bidding is an offer to set a price tag by an individual or business for a product or service. In this guide, you will learn about each type of bidding strategy so that you can make informed decisions when it comes to bid on items for your business.

Bidding is one of the most important aspects of online marketing. It’s how you get your ads in front of people who are interested in what you’re selling. You need to know what kind of bidding works best for your business, but there are many different types that you should be aware of.

Bidding is an offer to set a price tag by an individual or business for a product or service. In a market, a bidder is a party offering to buy an asset from a seller at a specific price. A bidder can be an individual or organization, and the potential purchase can be part of a multiparty transaction or an auction. In most cases, the party selling the asset chooses the bidder who offers the highest price. Bidding can take place in an auction or under other circumstances. In auctions, bidding is a process that determines who gets the asset and for what price. If the person offering the highest price wins, this type of bid is called “first-price,” because all bidders pay the same price, which is usually higher than the second-highest bid.

Bidding Types

There are many types of bidding strategies that can be used in negotiations and auctions. The type of auction determines how much information is available to bidders, as well as how many bids each bidder can make and if there are any rules about the bidding process.

  • Sealed bid. The type of bid is a sealed-bid first-price auction also known as an English auction. Bidders submit their bids without knowing what other people have. Subsequently, all winning bidders will receive the item at the same price for which they have bid. This process happens without rules or changes, with all bids being final when submitted to the auctioneer until completion of the sale.
  • Dutch auction. Another type is a Dutch auction, where bidders simultaneously submit their best price along with the quantity to purchase. As bidding progresses, quantities are recalculated at reduced prices until a single buyer purchases all remaining units at the lowest price in which excess units are sold to buyers whose maximum prices were exceeded by that price. This process happens without rules or changes, with all bids being final when submitted to the auctioneer until completion of sale.
  • Combinatorial auction. This is a combinatorial auction where bidders simultaneously submit their choices and the outcome depends on the intersections of choice sets. This process happens with rules or changes to the bidding process. Bidders may be able to change bids before they are submitted to the auctioneer until the completion of the sale.
  • Dynamic bidding. Dynamic auctions occur with rules changing the bidding process such as second-price sealed-bid auctions where winning bidders pay only the highest losing bid, which means that those who overbid will simply withdraw their excess bids rather than offering them at lower prices.
  • Timed bidding. Timed bidding is the act of bidding at a pre-determined time on an item that will be sold by timed auction. The timed auction happens with rules or changes to the bidding process, bidders may also be able to change bids before they are submitted to the auctioneer until completion of sale.
  • Live bidding. Bidding is a live auction that occurs with rules changing the bidding process, with participants being able to communicate in real-time during an auction. Participants are also able to create bids before the live event starts, although they may be prevented by the auctioneer’s rules.
  • Traditional bidding. In traditional bidding, the player sitting to the right of the dealer begins by either passing or making a bid. A bid is an offer for your partnership to take at least 6 or 7 tricks if allowed to play alone with the named suit as trump. The higher bidder names a contract specifying how many tricks they want their partnership to take and announces this to be their contract. After each trick, points are counted toward achieving this goal according to rules.

Steps in the Bidding Process

There are six steps in the bidding process.

The first step is to pre-qualify as many as possible of those who express an interest in your property before you attend a public auction. It also gives you an opportunity to check if those interested can afford to purchase and finance what they wish to buy without difficulty. Although not always essential, it would certainly be advisable for those intending purchasers with limited means (e.g. first time buyers) and/or few sources of funds (e.g older people helping their children) to provide evidence of income and borrowings or at least indicate clearly how they intend to fund their purchases before attending the auction.

The second step is ‘A Guide Price’, which is the amount at which your property should be sold if there is a level of interest in your property and an element of competition for it.

Further, you need to attend the auction in person. This is when you get the chance to find out more about prospective purchasers and their plans. It can be quite interesting, especially if there are unusual or difficult purchasers bidding for your property. You will meet auction professionals but this is no substitute for attending themselves. After all, this is exactly what the purchasers will themselves do. One further comment to make here is that conducting an auction sale can be quite expensive. Auctioneers typically charge a percentage of the money raised from a property and your solicitor or conveyancer may well levy a separate charge for arranging the legal work associated with the auction process.

The fourth step is ‘Examination’. This is when potential purchasers examine your property. This can be done before or after the auction (and sometimes even both). However, you should ensure that your property is ready for viewing and accessible at the time stated in the information for prospective purchasers.

The fifth step is the submission of offers to purchase. The auctioneer will provide potential purchasers with a form on which they can record their interest in purchasing your property. Remember that this is an indication of intent only and not an offer to purchase until the auction process has been completed.

The final step is ‘After-sales service’. Once you have sold your property, you will need to ensure that the purchaser’s solicitor or conveyance carries out its role effectively, by checking that all relevant documentation is in place. You will then be asked to sign documents to confirm your sale of the property and you should make sure that at this point you are delighted with the terms of sale you have agreed with your purchaser before doing so. You may also receive requests for further information after the sale has been completed. This would typically include documentation relating to any fixtures and fittings which you were keen for your purchaser to take with them, as well as the full range of relevant documents.

Bidding and Auction

The most significant difference between bidding and auction is that with a bidding sale, the auctioneer begins with a price he thinks the item will sell for and will incrementally raise his voice as potential buyers bid against each other. The bidding process could end anywhere depending on how competitive the bidders are and how high they want to go (and how much money they have). With an auction, there is no reserve price. It is simply “whoever bids highest gets the item.” Auctioneers use different techniques to encourage people to raise their hand, such as asking for one dollar bids until someone finally raises their hand. If you let the auctioneer know what you are willing to pay for an item before it is even brought out, he will mark it accordingly.

Another difference between bidding and an auction is how the bidder pays. In bidding, once the auctioneer’s gavel falls, whoever bid highest takes possession of the item right then and there if they have enough money to cover those bids. Payment methods vary from sale to sale, but checks are often out of order and cash or cards at this point. If you ask for a chance to pay later, you will be likely told: “Sorry, we take care of our winners first.” In an auction scenario, payment must be made before taking possession of the item.

Some auctions will allow absentee bidding where you enter your email address and leave bids with them before they submit for you during the actual auction. They let you know what’s happening at all times via email updates of what’s just been sold and how much and ask if there are any more bids from your side. There is usually a place to enter item numbers so that they will hold those items for a certain amount of time before selling them if no one else has bid on them yet, and alerting you so that you can bid again if necessary.

The difference between the two bidding methods is that your bids add to the price of an item in a bidding sale, while in an auction when someone’s willing to pay more than the current high bid, it becomes theirs.

Conclusion

Bidding is a competitive offer to set a price tag by an individual or business for a product or service. It is also the demand that something is done. Bidding has been used for centuries to determine the worth of something. It is one of the most important aspects of online marketing. There are many types of bidding strategies, and you need to know which of them work best for your business.

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FAQ

What is bidding?

Bidding is an offer to set a price tag by an individual or business for a product or service.

What is the purpose of bidding?

The purpose of bidding is to place a monetary value upon a work of art.

What are the types of bidding?

There are many types of bidding strategies that can be used in negotiations and auctions. They include sealed bidding, Dutch auction, combinatorial auction, dynamic bidding, timed bidding, live bidding, traditional bidding.

What is the difference between bidding and auction?

The most significant difference between bidding and auction is that with a bidding sale, the auctioneer begins with a price he thinks the item will sell for and will incrementally raise his voice as potential buyers bid against each other. The bidding process could end anywhere depending on how competitive the bidders are and how high they want to go (and how much money they have). With an auction, there is no reserve price. It is simply “whoever bids highest gets the item.” Auctioneers use different techniques to encourage people to raise their hand, such as asking for one dollar bids until someone finally raises their hand. If you let the auctioneer know what you are willing to pay for an item before it is even brought out, he will mark it accordingly.

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