Perhaps because that particular auction is not the kind of auction you think it is. Perhaps because some bidders spend years mastering strategies that enable them to exploit the misunderstandings of the unwary. And perhaps because smart auction principles can be used to buy and sell computer resources in a way that substantially optimizes human time and money. In fact, there are many different auction formats including the familiar ascending bid, but also including the descending, sealed-bid, simultaneous, handshake, and whispered forms of bidding. Many of the more unusual formats have been practiced for hundreds of years including one variety in which huge estates have been sold during the time it took for a single one-inch candle stub to flicker out.
Auctions are useful when selling a commodity of undetermined quality.
Auctions can be used for single items such as a work of art and for multiple units of a homogeneous item such as gold or Treasury securities. They are useful in circumstances wherein the goods do not have a fixed or determined market value, in other words, when a seller is unsure of the price he can get. In a price negotiation, each bid and counter-bid is considered separately, but in an auction the competing bids are offered almost simultaneously. The common denominator is that the value of each item varies enough to preclude direct and absolute pricing. Simply stated, an auction is a method of allocating scarce goods, a method that is based upon competition.