Types of Auctions

Types of Auctions

There are several different types of auctions to choose from depending on the seller's needs. They are standard auctions, reverse or "upside down" auctions, reserve price auctions, and dutch auctions which list multiple items.

Standard auctions are the type where you list an item for sale beginning at your lowest acceptable price and successive bidders cause the price to go up.

Reserve Price auctions may list a low starting price, however there is a higher unknown reserve price. The Reserve Price is the lowest price at which a seller is willing to sell an item, even though the Opening Bid price may be much lower. If the bidding does not meet or exceed this price, there is no sale. The Reserve Price is never disclosed to bidders. There cannot be a reserve price in a dutch auction.

Reverse auctions, also known as upside down auctions, are auctions where people can list what they want and need and have other people submit offers to them. When someone posts a reverse auction, he or she is not looking to sell something, but rather to buy something. That something can be a product or a service. As a reverse auction progresses, the price drops.

Dutch Auction only applies to multiple-item auctions. In a Dutch Auction, all winning bidders get their items at the lowest winning bid price. There can be no Proxy Bidding or Reserve Price for Dutch Auctions.

Example, a Dutch auction has 10 items for sale. The opening price for the items is $1.00 each. After the auction opens, 20 people place equal bids for the items at $1.00 each. If the auction were to close at this point, the first 10 people to bid would be declared the winners, because earlier bids take precedence over later bids of equal amount (and in this case, quantity). However, before the auction closes, a new bidder places a bid of $3.00 for one of the items. Because this person has the highest bid, he/she will most certainly win one of the 10 auction items. The remaining 9 items are won by the first 9 bidders who bid at $1.00. However, because all bids clear at the lowest winning bid, the person who bid $3.00 will only be required to pay $1.00 for the item. By bidding over opening price, new bidders can essentially knock the earlier low bidders out of the running.

Use of this site constitutes agreement with our Terms of Use and our Privacy Policy.