Bidding

Bidding is an offer (often competitive) to set a price by an individual or business for a product or service or a demand that something be done.^[1] Bidding is used to determine the cost or value of something.

Bidding can be performed by a "buyer" or "supplier" of a product or service based on the context of the situation. In the context of auctions, stock exchange, or real estate the price offer a business or individual is willing to pay is called a bid. In the context of corporate or government procurement initiatives, the price offer a business or individual is willing to sell is also called a bid. The term "bidding" is also used when placing a bet in card games. Bidding is used by various economic niches for determining the demand and hence the value of the article or property, in today's world of advanced technology, the Internet is a favored platform for providing bidding facilities; it is a natural way of determining the price of a commodity in a free market economy.

Many similar terms that may or may not use the similar concept have been evolved in the recent past in connection to bidding, such as reverse auction, social bidding, or many other game-class ideas that promote them selves as bidding. Bidding is also sometimes used as ethical gambling in which the prize money is not determined solely by luck but also by the total demand that the prize has attracted towards itself.

Topics

Online bidding

Bidding performs in two ways online: unique bidding and dynamic bidding.

Unique bidding: In this scheme, the user who gives the most unique bid wins the bidding. For example, if users A, B, C, D, and E are bidding for the same product, and A bids $5, B bids $5, C and D bid $2, and E bids $3, then E wins the bidding because his bid was unique.

Dynamic bidding: This is a type of bidding where one user can set his bid for the product. Whether the user is present or not for the bidding, the bidding will automatically increase up to his defined amount. After reaching his bid value, the bidding stops from his side.

Timed bidding

Timed bidding auctions allow users to bid at any time during a defined time period, simply by entering a maximum bid. Timed auctions take place without an auctioneer calling the sale, so bidders don't have to wait for a lot to be called. This means that a bidder doesn't have to keep his eye on a live auction at a specific time.

By entering a maximum bid, a user is indicating the highest he is willing to pay for a lot. An automated bidding service will bid on his behalf to ensure that he meets the reserve price, or that he always stays in the lead, up to his maximum bid. If someone else has placed a bid that is higher than the maximum bid, the bidder will be notified, allowing he to change the maximum bid and stay in the auction. At the end of the auction, whoever's maximum bid is the most wins the lot.

Live bidding is a traditional room-based auction. These can be broadcast via a website where viewers can hear live audio and see live video feeds. The idea is that a bidder places their bid over the Internet in real-time. Effectively it is like being at a real auction, in the comfort of the home. Timed bidding, on the other hand, is a separate auction altogether, which allows bidders to participate without the need to see or hear the live event. It is another way of bidding, that is more convenient to the bidder.^[2]

Bidding in procurement initiatives

Most large organizations have formal procurement organizations that acquire goods and services on their behalf. Procurement is a component of the broader concept of sourcing and acquisition. Procurement professionals increasingly realize that their make-buy supplier decisions fall along a continuum, from buying simple transactions to buying more complex and strategic goods and services (e.g. large scale outsourcing efforts). It is important for procurement professionals to use the appropriate sourcing model. There are seven models along the sourcing/bidding continuum: basic provider, approved provider, preferred provider, performance-based/managed services model, vested business model, shared services model and equity partnerships.^[3]

Bidding off the wall

Bidding off the wall, or taking bids from the chandelier, as it is sometime known, is where the auctioneer bids on behalf of the vendor.

This is allowed by law in some countries and states, and the auctioneer is allowed to bid on behalf of the vendor up to, but not including, the reserve price. In some cases, this may be extremely helpful for bidders because the reserve needs to be met.

For an example, suppose a property is coming up for auction and there is only one person interested in bidding for it in the room. The reserve has been set at $100,000, and this bidder is happy to buy it at $120,000. The bidding starts at $80,000. Without the auctioneer bidding on behalf of the vendor, it would never progress beyond that amount. However, because the auctioneer will take bids or generate bids of $85,000, the bidder then goes to $90,000 etc. If the bidder wants to, he may bid 100,000 pounds and secure the property on the reserve price.

The result is that the vendor has sold the property at reserve and the purchaser has bought the property on the reserve price at less than he was prepared to pay. Without the auctioneer taking bids off the wall, this would never have happened.

All professional auctioneers do this with all types of auctions, including motor vehicles. As long as they are pushing it up towards the reserve price, then it is not an issue. If you don't want to bid at the price the auctioneer is asking, don't bid. If the goods don't meet the reserve and no-one but you wants to buy, then if the auctioneer didn't bid off the wall to meet the required price, the goods wouldn't be sold anyway.^[4]

References

1. "Definition of bidding in English". Oxford. Retrieved 29 March 2014.
2. "Bidding at Auctions". Auction Bidding. Retrieved 31 March 2015.
3. Keith, Bonnie, et. al., (2016). Strategic Sourcing in the New Economy: Harnessing the Potential of Sourcing Business Models for Modern Procurement (1st ed.). NewYork: Palgrave Macmillan. ISBN 978-1137552181.
4. "Bidding Terminology". Auctions UK. Gauk Auctions. Retrieved 31 March 2015.