Learning Different Auction Types

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When it comes to eAuctions, you should know your Japanese from your Dutch! In this short but informative article, you’ll find 3 obscure and different types of auctions that you might find very useful.

I first started working with auctions when I was a stock negotiator for a leading stationary supplier – I found Scanmarket to be invaluable not just for learning about auctions but carrying them out with real-time software. Read more about eAuction here.

Japanese

This dynamic auction style uses gradually increasing prices to narrow down buyers until only one is left. All those interested in buying the product up for auction enter a room, sometimes called an arena. The price starts at the lowest and increases in small amounts gradually. As the price increases, buyers will begin to drop out if it becomes to pricey, or stay in the room if they are determined to outbid everyone and take the product home.

For example, you are auctioning off 500 desks from offices that are closing. You can advertise so that all your bidders know you’re selling the 500 desks for $5,000. The bidders that are interested will join a room, or arena, and you start to slowly increase the price. Eventually you end up at $7,800 for all 500 desks and only 1 bidder left who has now bought the desks.

Dutch

Dutch style auctions are mostly used for shares but you can apply the principle to other sellable commodities too. Say you have 100 pencils to sell. You start with a high price per pencil. You may only have a few bidders, each wanting 1 pencil each… but you need to sell 100. So, you gradually lower the cost of a pencil until you have enough bidders to sell the whole lot.

Reverse

Unsurprisingly, this type of auction works in reverse. Suppliers submit offers (rather than buyers) to a single buyer. There will probably be multiple suppliers sending offers to one buyer. This drives down prices as each supplier wants to offer the best price so that the buyer will buy from them. This relies on real-time auction software as all the suppliers need to be able to see each other’s prices for it to work.

Of course, there are many more types of auctions from Reserve to English to Vickrey. You can also have auctions like reverse Japanese that combines both styles. This is why I found Scanmarket so helpful – their software was happy to change to suit the style of eAuction we were hosting that day. Furthermore, everything was in real-time which really is essential to running a successful eAuction!

Whether you’re just a beginner or a pro at eAuctions, I hope you’ve found this article informative and useful.