Types of auctions

English reverse auction

In the English Reverse Auction (Standard Auction), a starting price is set and during the auction period suppliers compete by lowering the price according to the set parameters. The contract is usually awarded to the supplier who offers the best price for goods / services. The English reverse auction is most commonly used in cases when there are two or more suppliers offering the same price for the requested goods / services.

The suppliers bid in accordance with set parameters. These are the most important rules of English Reverse Auctions:

• The auction supports multiple Line Items,

• Start time and duration of the auction is set in advance by the buyer (e.g. duration of 20 minutes),
• Although the duration of the auction is defined1Information about the auction duration and time extensions is visible to suppliers., it is automatically extended according to the (default) settings entered by the buyer (e.g. extension of auction by another 2 minutes if the bidder placed a bid in the last minute),

• Prices are lowered solely on the basis of new bids submitted by bidders,

• During the auction, buyers do not see real company names but aliases (e.g. Supplier 1),

• The buyer can specify a minimum reduction of bids (e.g. a new bid must be at least EUR 500.00 lower than the current best bid OR a new bid must be at least 30% lower than the current best bid),

• Suppliers do not see auction information related to other suppliers (however, supplier can see information related to the auction process, e.g. leading bid their last offer etc.),

• After the auction time has expired, the auction is closed and real company names are shown to the buyer.

 

JAPANESE REVERSE AUCTION

In the Japanese reverse auction, the buyer starts the auction with a (very) high starting price, which is automatically lowered at certain intervals. Bidders have the option of staying in the auction or withdrawing from further participation. The bidder who stays the longest wins and gets the job. The Japanese reverse auction is most commonly used in situations where there are few suppliers or where the prices offered by suppliers vary widely.

These are the most important rules of Japanese Reverse Auctions:

• The auction supports only one Line Item,

• Auction start time is defined by the buyer but without a specific duration,

• Starting price of the auctioned item is set by the buyer,

• Price is reduced in intervals (e.g. every minute). In order to continue participating in the auction, suppliers must accept the new (lower) price in the new interval,

• By accepting the current price (in the current interval), bidders submit their bid and at the same time show their willingness to continue participating in the auction,

• Those suppliers that do not accept the current price in one of the intervals terminate their participation in the auction procedure and the auction ends for them.

 

DUTCH REVERSE AUCTION

In the Dutch reverse auction, the buyer starts the auction with a (very) low starting price, which automatically increases at certain intervals. The supplier who accepts the offered price first wins and the auction is finished. The Dutch reverse auction is suitable in cases where there is a large number of suppliers. Suppliers are in a situation where there is a high probability that they will lose the job if someone else accepts the offer before them so the buyer can be pretty sure that the price accepted by a bidder is really the lowest price at which any supplier can offer their product or service.

These are the most important rules of Dutch Reverse Auctions:

• The auction supports only one Line Item,
• Auction start time is defined by the buyer but without a specific duration,
• Starting price of the auctioned item is set by the buyer,
• Price is automatically increased in intervals (e.g. every minute). If no supplier accepts the set price in that time interval, the price is automatically increased by the system to a new (higher) price and a new time interval begins,
• The first supplier who accepts the set price in a certain interval is the winner of the auction,
• After the first supplier accepts the price, the auction ends immediately for all suppliers,