Introduction

Auctions are one of the oldest surviving classes of economic institutions. The first historical record of an auction is usually attributed to Herodotus, who reported a custom in Babylonia in which men bid for women to wed. Other observers have reported auctions throughout the ancient world - in Babylonia, Greece, the Roman Empire, China, and Japan.

As impressive as the historical longevity of auctions is the remarkable range of situations in which they are currently used. There are auctions for livestock, a commodity for which many close substitutes are available. There are also auctions for rare and unusual items like large diamonds, works of art, and other collectibles. Durables (e.g., used machinery), perishables (e.g., fresh fish), financial assets (e.g., U.S. Treasury bills), and supply and construction contracts are all commonly bought or sold at auction. The auction sales of unique items have suggested to some that auctions are a good vehicle for monopolists. But it is not only those in a strong market position who use auctions. There are also auction sales of the land, equipment, and supplies of bankrupt firms and farms. These show that auctions are used by sellers who are desperate for cash and willing to sell even at prices far below replacement cost.