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Online Auction Software - How it Works

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Limit / Standard Bid

Limit Bid / Standard Bid.

A Limit Bid (or limit bid, maximum bid) is the maximum amount a bidder is willing to pay for an item. However, unlike an Absolute bid, the Limit Bid amount is ONLY used as the bidding process dictates. In general, the high bid is only increased the minimum amount (as dictated by the minimum raise rules) required to keep the Limit Bidder in the lead. If greater than the current high bid, a Limit Bid is never disclosed to other bidders.


Example 1: (first bid limit)

Assume there are NO bids on an item and the minimum bid is $100. Since there is NO Minimum Raise required for an item with no bids, Bidder A must bid at least $100. If Bidder A places a Limit Bid of $130 then the High Bid will be $100 with Bidder A the High Bidder. Note that Bidder A has a $130 Limit Bid and therefore "owns" all bids up to $130 if any additional bidding occurs.


Example 2: (existing limit exceeds the new limit by more than Minimum Raise)

Assume the current High Bid on an item is $100 and is held by Bidder A with a Limit Bid of $150. If the Minimum Raise is $10, then Bidder B must bid at least $110. If Bidder B places a Limit Bid of $120 then the High Bid will increase to $130 ($120 new limit + the $10 Minimum Raise) with Bidder A remaining as the High Bidder. Note that Bidder A still has a $150 Limit Bid.


Example 3: (existing limit exceeds the new limit by less than Minimum Raise)

Assume the current High Bid on an item is $100 and is held by Bidder A with a Limit Bid of $150. If the Minimum Raise is $10, then Bidder B must bid at least $110. If Bidder B places a Limit Bid of $145 then the High Bid will increase to $150 ($145 new limit + the $5 remaining on the existing Limit Bid) with Bidder A remaining as the High Bidder.


Example 4: (existing limit exceeds the new limit by the Minimum Raise)

Assume the current High Bid on an item is $100 and is held by Bidder A with a Limit Bid of $150. If the Minimum Raise is $10, then Bidder B must bid at least $110. If Bidder B places a Limit Bid of $150 then the High Bid will increase to $150 ($150 existing limit) with Bidder A remaining as the High Bidder.


Example 5: (new limit exceeds the existing limit by more than Minimum Raise)

Assume the current High Bid on an item is $100 and is held by Bidder A with a Limit Bid of $150. If the Minimum Raise is $10, then Bidder B must bid at least $110. If Bidder B places a Limit Bid of $180 then the High Bid will increase to $160 ($150 existing limit + the $10 Minimum Raise at the existing limit level) with Bidder B as the new High Bidder. Note that Bidder B will now have a $180 Limit Bid and therefore "owns" all bids up to $180 if additional bidding occurs.


Example 6: (new limit exceeds the existing limit by less than Minimum Raise)

Assume the current High Bid on an item is $100 and is held by Bidder A with a Limit Bid of $150. If the Minimum Raise is $10, then Bidder B must bid at least $110. If Bidder B places a Limit Bid of $155 then the High Bid will increase to $155 ($150 existing limit + the $5 available on the new limit) with Bidder B as the new High Bidder. Note that in this case Bidder B meets the initial Minimum Raise requirement, but is NOT required to exceed the existing Limit Bid amount by the Minimum Raise at that level.


Example 7: (new limit exceeds existing limit by the Minimum Raise & existing limit >= minimum bid)

Assume the current High Bid on an item is $100 and is held by Bidder A with a Limit Bid of $110. If the Minimum Raise is $10, then Bidder B must bid at least $110. If Bidder B places a Limit Bid of $120 then the High Bid will increase to $120 ($110 existing Limit Bid + the $10 Minimum Raise) with Bidder B as the new High Bidder.

Example 8: (new limit exceeds existing limit by the Minimum Raise & existing limit < minimum bid)

Assume the current High Bid on an item is $100 and is held by Bidder A with a Limit Bid of $105. If the Minimum Raise is $10, then Bidder B must bid at least $110. If Bidder B places a bid of $115 then the High Bid will increase to $115 ($105 existing limit + the $10 Minimum Raise at the existing limit level) with Bidder B as the new high Bidder.

 

Traditional Auction

Traditional Bidding Auction.

The Traditional Bidding method allows the Bidder to place an Absolute Bid for the exact amount he/she wishes to pay. Unlike Standard Bidding, Limit Bids are NOT allowed. Therefore, if successful, the High Bid is raised directly to the amount of the Absolute Bid placed. Traditional Listings may contain an optional Reserve Price. In addition, Traditional Listings may utilize Extended Bidding. Please check the associated Bid Form for details.

 

Example 1: (Assuming this auction was set up without Reserve Price option)

If the Starting Bid on an Item is $100 and Bidder A bids $150, the Current Bid goes directly to $150 regardless of the Bid Increment. If the Bid Increment at $150 is $10, then the Minimum Bid is $160. If Bidder B bids $175, then the Current Bid becomes $175 with Bidder B holding the High Bid. Meaning that the price jumped from point A to point B where B is the highest price offered. Unlike Limit Bids where the highest price shows are the current price plus the increment.

 

Example 2: ((Assuming this auction was set up with a Reserve Price)

If the Starting Bid on an Item is $100 with a Reserve Price of $200 and Bidder A bids $150, the Current Bid goes directly to $150 (note the reserve is NOT yet met). If the Bid Increment at $150 is $10, then the Minimum Bid is $160. If Bidder B bids $175, then the Current Bid becomes $175 with Bidder B holding the High Bid (note that the reserve is still not met). If the Bid Increment at $175 is still $10, then the Minimum Bid is $185. If Bidder C bids $200, then the Current Bid becomes $200 with Bidder C holding the High Bid and the Reserve Price is now met.

This type of auction is the easiest to understand because it's a very traditional way of auction.

More about How it Works are available at our online library both video and online documents.