Dutch Auction

Auction trading is a common phenomenon in our time. And it's not so surprising, because it helps one sellers profitable to realize certain goods, and others to buy what they need at a price that is profitable for themselves. It is difficult to overestimate the importance of this type of trade. This is evidenced by international auctions, through which huge volumes of goods are sold. So, about 70% of tea, 90-95% of unwashed wool, significant volumes of furs are sold in this way. In Holland, there are always working floral auctions.

Some believe that the sale of goods at auction is beneficial only to sellers, because the price with each step is constantly growing and it seems that it just winds up. However, this is partly true only for the traditional type of auction, to which we are all accustomed. But the auction can be carried out in a different way, when the price with each step does not increase, but decreases. This type of auction is called Dutch.

The Dutch auction is a kind in which a deliberately inflated starting price is immediately assigned, and then it begins to gradually decrease until someone buys the exhibited goods. If there are several sellers, then the buyer chooses from them the one who asks for a lower price.

This type of auction sales in international practice is sometimes called wading. Its essence lies in the following: the seller determines the maximum price for his goods, which can be seen in the special dial set in the hall, and begins to lower it until one of the participants presses the button assigned to him and thereby expresses his intention to make a deal .

The Dutch auction is usually used to sell a large number of identical items. It is very convenient both for small wholesale buyers, and for wholesalers. By the way, it was invented by its sellers of tulips, as they were very interested in wholesale sales of their perishable goods. The undoubted advantage for the seller is the possibility of an easy and quick sale of their goods. And buyers benefit from the fact that the price will be higher than the starting price only if the demand exceeds the supply. The Dutch auction is also called reverse, in contrast to the traditional way of this kind of trade. Everyone can take part in it, because there are many websites on the Internet that allow both to sell and to buy goods with the help of an auction. As an example, consider a Dutch auction on eBay.

Winners in it can be several. Another feature is that the participant in addition to the price should also indicate the amount of goods that he wants to purchase. The system "proxy bidding" does not work here, it means that the maximum bet of each participant is known to all potential buyers. The buyer has the right not to buy the lot, if suddenly it turned out that his share accounted for a smaller number of goods than he ordered. In this case, the remainder of the product will be offered to the bidder next to you.

A curious detail: according to the rules of eBay, when the auction comes to the finish, every winner pays at the price that was indicated in the minimum successful bet! Since eBay does not send notifications that you "left" the list of winners of the Dutch auction held, you need to check the bidding from time to time in order to make a new bet if necessary. It looks a bit confusing, does not it? Therefore, consider some examples.

Suppose a certain seller decided to put 10 digital cameras on the Dutch auction, the starting price of each of which is 200 USD. If there are 10 or fewer people she is comfortable with and they bet on 200 USD, then they will all be on the winners list. And if there are more people, for example 15 people, then only the first 10 will win. For example, among these 15 participants, 7 people put 150 USD, and 5 participants - 130 USD. In this case, the cameras will receive the first 7 people with rates of 150 USD and 3 people who put 130 USD before the others. And they all will pay the price at 130 USD, since this is the size of the minimum winning bid.