A futures auction is an event where a seller accepts offers from potential buyers and reserves the right to accept or reject them. Different forms include English and Dutch auctions, with the seller able to decline all bids and retain ownership of the item. Other types include the Japanese and Yankee auctions, with electronic auctions making bidding convenient.
A futures auction is a type of event in which a seller accepts offers from a variety of potential buyers and reserves the right to select one of these offers or reject them all. This type of auction can take several forms, ranging from auctions involving setting a minimum price and then entertaining bids above that minimum, or starting at a high price that is unlikely to be met and then accepting offers closest to the highest possible price. One of the distinguishing features is that, unlike other types of auctions, the seller in a futures auction has the ability to decline all bids and retain ownership of the auctioned item if none of the bids are considered acceptable. .
One of the more common examples of a futures auction is known as the English auction. In this scenario, the seller sets an acceptable minimum and entertains bids that are incrementally higher than that minimum. With this approach, all bidders know the amount of each bid made, although the identity of each bidder may or may not be known by anyone other than the seller. Once the offer is closed, the seller can review each offer and decide which one will be accepted. The seller may also decide that all offers are unacceptable and choose to retain ownership of the item for the time being.
A similar approach to direct auctioning is known as the Dutch auction. With this approach, the owner-set price is usually very high and is reduced incrementally until a bid is received on the item. From there, bidding can be entertained until bidding officially closes. From there, the seller will evaluate the offers, usually going with that as close to the original price as possible.
Other forms of direct auction are also in common use. The Japanese auction begins with a minimum bid and requires all participants to bid at each level of the auction or to waive the right to continue. With a Yankee auction, sellers will offer multiple units of an item as part of the auction, with bidders specifying both a quantity and a price based on that quantity. Different forms of the futures auction work well in both a virtual and a more traditional environment, making using an electronic auction to bid on property or to accept offers for goods and services from sellers and other types of suppliers very easy and convenient.
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