Introduction In 1995, eBay used the Internet to pioneer a business model that provided for efficient one-on-one online trading in an auction format. eBay was successful in employing the power of the Internet to improve the efficiency of one of the world oldest form of barter, the auction process.
Throughout history, auctions have been used to bring people together to in order to create the most efficient markets for the sale of goods that are often difficult value upon. The effectiveness of an auction is dependant on the ability to bring large numbers people together to place value on goods, often in areas with narrow interests. It is the large number of people's consensus opinions that creates the most accurate, market-based, statement of an item's valuation.
Scholars argue that the first auctions occurred when Joseph of the Many-Colored Coat was sold into slavery by his brothers, however the first generally accepted auctions occurred in Babylon in about 500 B.C. Women were sold on condition that they be married. Not surprisingly, beautiful women commanded very high, active bidding by participants resulting in high sales prices, however, unfortunately, the less attractive women had to pay a dowry to be accepted and thus the sales price was negative.
A more recent reference to the auction as practiced in Great Britain is from an entry in the 1595 Oxford English Dictionary. At that time, auctions were held in taverns and coffeehouses to sell art and furniture. A seventeenth century catalog describes a process called "mineing", which was similar to the Dutch auction because the auctioneer started the bidding high and worked down. A lot was claimed when someone yelled, "Mine".
There are many popular ways to facilitate the auction process. As in the example above, a Dutch auction starts at a high price and the...