Candle auction

Candle auction was used from about 1490 to 1893 and is occasionally used even today for ceremonial purposes (and on-line). After 1674 the Candle auction was gradually replaced by the English auction in most cases. Both types of auction are ascending open auctions.

The auctioneer will light a one-inch tallow candle on top of his desk and accept bids only as long as the candle is burning (15 to 20 minutes). In Samuel Pepys' (1633-1703) famous diary from London he relates two occasions when the Admiralty (his employer) sold surplus ships “by an inch of candle”. (November 1660 and September 1662). (An English auction would require 20 seconds to 10 minutes).

It is the unpredictability of the exact moment, when no more bids will be accepted, that is used again in the age of the Internet. In these “Candle auctions without a candle” a computer will randomly select the exact moment, when the auction will end. The idea is to prevent bidders from waiting until the very last second before submitting their final bids. Instead the bids will be spread out and submitted a bit earlier. Additional bids may then increase the final bid. In this way the final bid will reach a higher level than would otherwise be the case. Everything can be computerized and the auction conducted on-line without a live auctioneer.

For other types of auctions see Auction.

Journal of Economic Literature, JEL, Classification System: D4 – Market Structure and Pricing. D44 – Auctions.

Further reading

Milgrom, Paul (2004). Putting Auction Theory to Work, 384 pp. Cambridge University Press. ISBN 0-521-53672-3.