AN AUCTION IS A METHOD OF ALLOCATING SCARCE GOODS
A METHOD THAT IS BASED ON COMPETITION

It is the purest of markets - a seller wishes to obtain as much money as possible, and a buyer wants to pay as little as necessary.

An auction offers the advantage of simplicity in determining market-based prices. It is efficient in the sense that an auction usually ensures that resources accrue to those who value them most highly and ensures also that sellers receive the collective assessment of the value.

An auction is also unusual in that, unlike other methods of selling, generally the auctioneer doesn't own the goods, but acts rather, as an agent for someone who does. Frequently, the buyers know more than the seller about the value of the item. A seller, not wanting to suggest a price first out of fear that his ignorance will prove costly, holds an auction to extract information he might not otherwise realize.