Introduction

Auctions are used throughout the e-commerce landscape. The most widely known auctions are consumer-to-consumer (C2C) auctions, in which the auction house is simply an intermediary market maker, providing a forum where consumers — buyers and sellers — can discover prices and trade. The market leader in C2C auctions is eBay, which had around 164 million active users and over 800 million items listed on any given day within thousands of different categories.

Less well known are business-to-consumer (B2C) auctions, where a business owns or controls assets and uses dynamic pricing to establish the price. Increasingly, online retail sites, such as Sam's Club, are adding auctions to their sites. Auctions also constitute a significant part of B2B e-commerce, and more than a third of procurement officers use auctions to procure goods.

Auctions are not limited to goods and services. They can also be used to allocate resources, and bundles of resources, among any group of bidders. For instance, if you wanted to establish an optimal schedule for assigned tasks in an office among a group of clerical workers, an auction in which workers bid for assignments would come close to producing a nearly optimal solution in a short amount of time.

In short, auctions — like all markets — are ways of allocating resources among independent agents (bidders). In the United States alone, there are several hundred auction sites, some specializing in unique collectible products such as stamps and coins, others adopting a more generalist approach in which almost any good can be found for sale.