Absolute Auction - Explained
What is an Absolute Auction?
Written by Jason Gordon
Updated at December 15th, 2021
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Table of Contents
What is an Absolute Auction?How does an Absolute Auction Work? Academic Research on Absolute AuctionWhat is an Absolute Auction?
An absolute auction is a type of auction sale when the purchase amount is neither set (reserve price) nor negotiated. Instead, the purchase amount comes through competitive, open bidding, with the highest price as the winning bid. The absolute auction is a classic auction when regardless of the cost of goods, the items sell at the highest bid price, which means the absolute price is $0.
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How does an Absolute Auction Work?
When there is a direct demand for sold goods, absolute auctions are held in many places, such as direct auctions, online markets, such as eBay.com, foreclosure markets, and so forth. Let's say two business owners wanted to end their business. They want to get rid of all their merchandise as quickly as possible by holding an absolute auction. Each item bid starts at $0, and the highest bid gets the product. An alternative to that example is a closed estimate auction or Dutch auction, which allows people to submit private offers after a high initial price gets set. The auction continues until the auctioneer reaches the lowered price a bidder is willing to pay for the item.
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