Auction Process
In a Dutch auction, the item being sold is initially offered at a very high price, well in excess of the amount the seller expects to receive. Bids are not sealed, as they are in some types of auctions. The price is lowered in decrements until a bidder accepts the current price. That bidder wins the auction and pays that price for the item. For example, suppose a business is auctioning off a used company car: the bidding may start at $15,000. The bidders will wait as the price is successively reduced to $14,000, $13,000, $12,000, $11,000 and $10,000. When the price reaches $10,000, Bidder A decides to accept that price and, because he is the first bidder to do so, wins the auction and has to pay $10,000 for the car.
There is some confusion over terminology: some financial commentators and some third-party auction sites use the term Dutch auction to refer to second-price auctions, which are totally different from Dutch auctions: in a second-price auction, the winner pays the amount bid either by the lowest winning bidder or by the highest losing bidder.
Dutch auctions are a competitive alternative to a traditional auction, in which bids of increasing value are made until a final selling price is reached, because due to ever-decreasing bids buyers must act decisively to name their price or risk losing to a lower offer.
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Famous quotes containing the words auction and/or process:
“The white American man makes the white American woman maybe not superfluous but just a little kind of decoration. Not really important to turning around the wheels of the state. Well the black American woman has never been able to feel that way. No black American man at any time in our history in the United States has been able to feel that he didn’t need that black woman right against him, shoulder to shoulder—in that cotton field, on the auction block, in the ghetto, wherever.”
—Maya Angelou (b. 1928)
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—Elizabeth Stuart Phelps (1844–1911)