Despite auction being a very popular form of selling and buying of goods and services, there are people who remain confused between the terms bidding and auction. This may be due to various types of auctioning systems in prevalence. As against the common practice of printing an MRP on the product and selling it in the market, auction is a practice of arousing curiosity among the people about a product and then allowing people to participate in an open auction where they place their bids to get hold of the product. The act of placing the bids is called bidding. The person who places the highest bid is normally given the product and the winner has to give a fixed percentage to those who conduct the process of auction.
If you delve deep in to history, you would find that the tradition called swayamvar in ancient India, where princesses selected from among many princes’s who gathered for the occasion as a form of auction. She chose after listening to the qualities and attributes of various princes’s and garlanded the prince she liked most. The word auction comes from the Latin word augeo that means I increase or augment. In ancient times, women for marriage were auctioned and highest bidder got hold of the woman she liked most. Similarly people placed bids for labors that remained bonded to them for their entire lives. In ancient Rome, it was a common practice to auction the assets of someone who could not repay his debts. In 17th century in England, auctions were carried out by lighting candles and the last and the highest bid was deemed successful when the candle went out.
English system of auction is the most popular system of auction worldwide. Bidders sit around a place where the products are exhibited and try to out bid one another by placing higher bids. The product is awarded to the highest bidder at the end of the auction.
Sealed auctions are more common in the case of awarding government contracts and tenders. In this system, individuals place their bids in sealed envelopes and the highest bidder is awarded the contract. Here, no bidder needs to know other bidders or their bids.
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In brief: • Auction is a very old tradition of selling or buying of goods and services which allows the highest bidder to get hold of the product or the service. Bidding is the act of making/placing bids. • In ancient times, women were sold and purchased through auction. Similarly, bonded labor was also sold and purchased in this fashion • While open auction is a more popular system of auctioneering, sealed auction is the manner in which government contracts and tenders are awarded.
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