Despite common thought that there is only one way to run an online auction (that is with one seller and multiple bidders), there are actually 5 common types of online auctioning. These are the classical model, also known as the forward model, the reverse auction, the Dutch auction, the demand management model and the stock market model.
The classical model of online auctioning involves one seller and one product, with multiple buyers trying to ‘win’ the sale. There is a set amount of time for the auction to take place and often a reserve (or minimum selling price) is set. Whoever placed the highest bid by the end of the designated auction time wins and becomes the buyer of the item. This method is particularly useful for rare and collectable items of high value where a high price can be fetched.
A reverse auction is simply a classical auction in reverse. It involves one buyer and multiple sellers who each offer to sell their item at a lower price than the seller before them. Whoever casts the lowest bid by the end of the auction gets to sell their item to the buyer. This is particularly useful when a service is needed. Reverse auctions are also known as “Upside Down auctions�.
A Dutch auction is similar to a reverse auction, however it has one seller and multiple bidders. The seller often sets the price at an unreasonable level, more than he/she would expect to get, then slowly drops the price until a bidder accepts it and buys it for that price. The first bidder to accept a price gets to buy the item. This type of auction is often used when there are product supply shortages.
A demand management auction involves multiple buyers and sellers, and a “market maker� is used as an intermediary for the auction. This type of auction is not as common and is mainly used for perishable items or items that have ‘variable or unpredictable’ demand (Ross; 2003;p.258).
Lastly, the stock market model also involves multiple sellers and buyers, is highly uncommon and when used is predominantly found in private markets.
More information about the process of online auctioning and forward and reverse auctioning can be found on Ebusiness - Online Auctioning
REFERENCES:
Ross, D.F. 2003 Introduction to e-supply Chain Management:Engaging Technology to Build Market Winning Business Partnerships. St Lucie Press: Florida, USA.
Emily Fraser 09:30, 28 Oct 2004 (EST)
