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A Chinese auction is a combination of a raffle and an auction that is typically featured at charity, church festival and numerous other events. It can also be known as penny social, penny sale, tricky tray or pick-a-prize according to local custom, or to avoid causing offense.
It is unclear whether this type of auction actually originated in China; it is much more likely that the term derives from "chance auction," which is also another name for this type of auction. The term "Chinese" may have been used in this case to convey that this type of auction was mysterious, intriguing, or secretive; possibly, it may have more derogatory connotations related to stereotypes of Chinese immigrants to the United States in the late 19th century.
The difference between a raffle and a Chinese auction is that in a raffle with multiple prizes, there is one "hat" from which names are drawn, but in a Chinese auction each prize has its own "hat". This allows ticket buyers to choose which prize to focus on, as opposed to having a first, second, third, etc. prize.
In a Chinese auction, bidders are not prospective buyers (as in the conventional English auction). Instead, they buy tickets, which are chances to win items. The tickets themselves are often inexpensive and bidders may buy hundreds of these tickets. Bidders buy as many tickets as they like, and bid them on any item(s) they want by placing one or more ticket in the "hat" beside the item(s) they are trying to win. At the conclusion of bidding, one winning ticket is drawn from the "hat" beside each item, and the item is given to the owner of that ticket.
A bidder may increase the chance of winning by buying and bidding more tickets on a specific item. Although there is generally no limit to the number of tickets a given individual may bid on a specific item, the chance of winning depends on the total number of tickets bid by all individuals.
Chinese auctions of this type have become very popular on the Internet, with various websites offering a variety of items for auction.
This type of Chinese auction is similar to the silent auction, with the difference being that in the silent auction bidders submit bids listing specific amounts that they are willing to pay for a specific item.
In another Chinese auction version, although not really an auction at all, each participant contributes a wrapped gift (of roughly similar value) to a common pool. Participants draw numbers to see who first gets to choose a gift from the pool. The second person may either choose a gift from the remaining ones in the pool, or may take ("steal") the first person's gift. The third person may then also choose a gift from the pool, or steal from the first or second person, and so on until all participants have chosen. People choosing gifts may or may not be required to open them immediately, depending on the local rules. This version of the Chinese auction is more commonly called a white elephant gift exchange (also "Yankee swap" or "Dirty Santa".)