English auction

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An English auction is an open-outcry ascending dynamic auction. It proceeds as follows.

• The auctioneer opens the auction by announcing a suggested opening bid, a starting price, or a reserve for the item on sale.
• Then the auctioneer accepts increasingly higher bids from the floor and sometimes from other sources, for example online or telephone bids. The auctioneer usually determines the minimum increment of bids, often making them larger as bidding reaches higher levels.
• The highest bidder at any given moment is considered to have the standing bid, which can only be displaced by a higher bid from a competing buyer.
• If no competing bidder challenges the standing bid within the time allowed by the auctioneer, the standing bid becomes the winner, and the item is sold to the highest bidder at a price equal to their bid.
• If no bidder accepts the starting price, the auctioneer either begins to lower the starting price in increments, or bidders are allowed to bid prices lower than the starting price, or the item is not sold at all, according to the wishes of the seller or protocols of the auction house.

The English auction is different from other auction systems in its most essential feature: the public bidding process can transmit information to bidders in real-time because it can potentially realize the sharing of private information. By introducing the common value factor, the English auction has a revenue advantage: each bidder's private information about the common value is valuable information to the other bidders, and this information is disclosed during the public bidding process.^[1]

Unlike sealed-bid auctions (such as first-price sealed-bid auction or Vickrey auction), an English auction is "open" or fully transparent, as the identity (or at least the existence) of all bidders and their bids is disclosed to each other during the auction. More generally, an auction mechanism is considered "English" if it involves an iterative process of adjusting the price in a direction that is unfavorable to the bidders (increasing in price if the item is being sold to competing buyers or decreasing in price in a reverse auction with competing sellers). In contrast, a Dutch auction would adjust the price in a direction that favored the bidders (lowering the price if the item is being sold to competing buyers, increasing it, if it is a reverse auction).

When the auction involves a single item for sale and each participant has as an independent private value for the item auctioned, the expected payment and expected revenues of an English auction is theoretically equivalent to that of the Vickrey auction, and both mechanisms have weakly dominant strategies.^[2] Both the Vickrey and English auction, although very different procedurally, award the item to the bidder with the highest value at a price equal to the value of the second highest bidder.^[3]