I'm not a SEO expert, so you should challenge everything I will say on that matter, but I will try to help you.
1) If you need to do that, 301 is the SEO friendly way to do it.
301 is also known as permanent redirect and should be used if the change you want to make is permanent. The stats of the old page will be transfered to the new destination page.
So, on the big picture and to answer your question, a lot of 301 will not probably hurt your SEO.
But... you're redirecting the user to a different content and be aware that you are transferring the stats from Product page to another page that is a page with recommendations.
You can read more about it on http://seo-hacker.com/301-302-redirect-affect-seo/
Another important point is that a lot of redirects can hurt your scalability, because you are increasing the load on your web servers.
2) As an user perspective I would prefer to keep the closed auction page alive and just show me some information saying the auction was closed (ebay does this).
You may also show some recommendations for relevant auctions on the site, but you should be very careful with the recommendations, if they are useless you may end angering the users.