Candle Auction – Understanding the Term, History, and Relevance

Candle Auction: Understanding the Term

Candle Auction, as the word suggests, uses a candle. And the candle becomes the reference point for the start and end of the option timing. In other words, before the beginning of the auction, a candle is lit. Further, the duration of the option remains till the candlelight is there. Therefore, the last bid just before the candle is closing becomes the winning bid. Or, we can say the auction ends once the candle’s flame is off.

The concept behind such an auction is that bidders do not get any idea when the auction ends, and thus, they do not intentionally place a last-second bid. Such an auction encourages bidders to bid seriously. One more name for this type of auction is “auction by the candle.”

History of Candle Auction

It is a variation of English auctions and was popular during the 1600s and 1700s. There is a record that such an auction was used in England in 1941. House of Lords’ records has a mention of such an auction. 

John Milton, an English poet and intellectual who served as a civil servant for the Commonwealth of England, also mentioned this auction. At the time, Milton notes that such an auction is the most probable way to get the true value of the items under auction.

Also Read: English Auction

Samuel Pepys’s diary of his London life records also talks about two such instances. When his employer sold surplus ships using the candle auction. Pepys was an English diarist and naval administrator. In his diary, Pepys even recounts a talk with a successful bidder. That bidder shared the observation that just before a candle expires, a candlewick always flares up slightly. And the bidder uses this signal to submit the final bid.

Is this Auction Relevant Now?

Such type of Candle Auction started fading out in the 17th century. There are, however, instances of Lloyd’s Coffee House in London using this auction to sell ships in the early 19th century.

Now, this type of auction is very rare. Still, some organizations use this auction to carry forward the tradition. For instance, in Chedzoy, Somerset, authorities sell a plot of church land every 21 years using this type of auction. Similarly, two pieces of land get auctioned annually using candle auction in Leigh, Dorset.

Also, some online auctions use this type of auction nowadays but with a modern twist to it. For instance, online auctions nowadays use computers in place of candles to randomly select the end time of the auction. Online auctions use such a type of bidding to avoid auction sniping.

Sanjay Borad

Sanjay Bulaki Borad

MBA-Finance, CMA, CS, Insolvency Professional, B'Com

Sanjay Borad, Founder of eFinanceManagement, is a Management Consultant with 7 years of MNC experience and 11 years in Consultancy. He caters to clients with turnovers from 200 Million to 12,000 Million, including listed entities, and has vast industry experience in over 20 sectors. Additionally, he serves as a visiting faculty for Finance and Costing in MBA Colleges and CA, CMA Coaching Classes.

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