Online auctions are carried out over the Internet through the use of auction software. Both goods and services can be auctioned off in this way. The largest online auction site in the world, eBay, is one such example of a site that facilitates the process of buying and selling online in which participants enter a price they are willing to pay for the things they are interested in purchasing. In this way it is a type of marketplace or clearinghouse for items that anyone wants to buy or sell.
Even though the auction takes place online, there are variations. Both English and Dutch auctions are used. English auctions start with a suggested price by the seller and bidders bid successively higher amounts of money in the hope of being the highest bidder. In a Dutch auction, multiple auctions are offered for sale. There is a suggested asking price and the bids get lower until a bidder is willing to accept the price being offered.
There are many advantages to online auctions. There is no time constraint or specific location to which a bidder must travel. Bidders can log onto the auction site from their home computers at any time of the day or night to place their bids. There are no geographical constraints, either, which means goods can be sold in any part of the world. There is the potential for making large profit for sellers because of the large number of bidders who may be interested in a specific product. For buyers, the Internet marketplace offers a large number of sellers with products for sale in numerous categories.