Posted by Nadezda on October 3, 2008, at 11:37:31
In reply to Re: Oops-- there goes the economy..., posted by Sigismund on October 2, 2008, at 14:56:32
There are several forms of reverse auction, but the simplest one is pretty much what it sounds like.
The usual auction-- other than on Ebay, which uses a modified form of it-- is the "English call-out auction"-- where bidders are in a room and each one calls out their bid, from the low bid to the high bid each outbidding the last bidder. Bidding ends when no one bids. The basic form of the auction is that any bidder can make multiple bids, bidders know what other bidders have bid, there's no limit on the number of bids, by each bidder, and the price goes higher as the bids are put into place.
A reverse auction (this type) uses a bidding system where there are multiple lots (rather than one individual item) on offer. During the auction period, each bidder puts in one bid, and only one bid, for a specified number of the items. All bids are offered within the bidding period without any knowledge of the bids of other bidders-- so the bidder has to bid enough to insure that s/he wins the number of items wanted. This puts pressure on bidders to bid their highest (reservation) price, so they'll be assured of getting the items they want. Low-ball bids put them in danger of losing out on desired items.
When the bidding period ends, all bidders who have the bids above the "market-clearing" price-- the price at which all items have been sold-- will receive his or her items. So bidders at the top get all of their items, and bidders who bid less may get fewer, or none of the items they bid for.
For example, if there are 50 items, and
bidder 1 bids for 20 items at $70/item, and
bidder 2 bids for 20 items at $60.00 per item, and
bidder 3 bids for 20 items at $50/item, and
bidder 4 bids for 10 items at $50/item and
bidder 5 bids for 10 items at $40./itembidder 1 will get 20 items, at $70/item
bidder 2 will get 20 items, $60/item,
bidders 3 will get 2/3rds of the remaining items
at $50/item,
bidder 4 will get 1/3rd of those remaining items at $50/item
bidder 5 will get no items
(there are several formulas for the pricing of items, but this is one common one)Hope this explains the general idea.
Nadezda
poster:Nadezda
thread:854180
URL: http://www.dr-bob.org/babble/poli/20081002/msgs/855501.html