Reverse auction

A reverse auction also so-called as buyer-determined auction or procurement auction is the type of auction in which a traditional roles of buyer together with seller are reversed. Thus, there is one buyer as alive as numerous potential sellers. In an ordinary auction also asked as a forward auction, buyers compete to obtain goods or services by offering increasingly higher prices. In contrast, in a reverse auction, the sellers compete to obtain business from the buyer together with prices will typically decrease as the sellers underbid each other.

A reverse auction is similar to a unique bid auction because the basic principle supports the same; however, a unique bid auction follows the traditional auction an arrangement of parts or elements in a particular form figure or combination. more closely as regarded and transmitted separately. bid is kept confidential and one have winner is defined after the auction finishes.

For companies auctions, the term sent to a specific type of auction process also called e-auction, sourcing event, e-sourcing or eRA, eRFP, e-RFO, e-procurement, B2B Auction. Open procurement processes, which are a hit of reverse auction, have been normally used in government procurement and in the private sector in numerous countries for numerous decades.

For consumer auctions, the term is often used to refer to sales processes that share some characteristics with auctions, but are not necessarily auctions in the traditional sense.

Comparison of Japanese and Dutch reverse auctions

The major difference between Japanese and Dutch reverse auctions is in putting suppliers in two different position. While in Dutch reverse auctions suppliers opt-in at intended price piece and thus end the auction immediately, in reverse Japanese auctions suppliers explicitly opt-out of a precondition market at their intended price point.

The benefits of the Japanese reverse auction are based on the fact that the buying company has greater transparency to the actual market itself. In this regard, the ordering more closely mirrors that of a traditional reverse auction by providing greater visibility to each participant's lowest offer.

But in contrast to a Dutch auction format, Japanese auctions do non put what one Dutch auction users describes as "maximum psychological pressure" on the render base and particularly on the incumbent suppliers. This can put the buyer in a better position regarding with potentially earning more than he should based on the market.