What is example of reverse auction?

Bidding for government contracts is an example of reverse auctions. In this type of auction, governments specify requirements for the project and bidders, who are approved contractors, to come up with a cost structure to finish the project.

Why would Suppliers favor reverse auctions?

Suppliers often favor reverse auctions because they give them a chance to capture business that they might not have otherwise had, perhaps because of a long-standing purchase relationship between the buyer and another supplier.

Why are reverse auctions controversial?

In a reverse auction, suppliers compete for the buyer’s business by underbidding one another. This increased competition among the supply base ought to lead to lower prices for buyers, although it also runs the risk of undermining a supplier relationship that has taken time and effort to build.

What are the different types of reverse auctions?

A reverse auction is of four types- Japanese auction, Dutch auction, Open auction, and Ranked auction. The best part about the reverse auction is that these are faster, eliminates the wastage of time, easy to compare, and offers the best prices. To conduct a reverse auction, there must always be more than one supplier.

How does Japanese reverse auction work?

In Japanese reverse auction, the buyer will have to settle on an opening bid which he sends to the suppliers. The ones that want to participate accept it, and the bidding starts. The price gradually goes down at specific intervals, and the bidders are asked to reject or accept it. The process continues until one winning bidder is left in the field.

What is open outcry or English reverse auction?

As the name suggests in the Open Outcry or English Reverse Auction, each supplier has full knowledge of the leading bid. The bidding starts at the maximum point that has been previously set and then starts falling gradually. Every player has an equal chance to win the bid.

What is reverse bidding in the stock market?

This type of reverse bidding is used mainly for public stock offerings. It offers a lot of flexibility, but it can even drop the prices and might complicate the supply chain process. This type of reverse auction begins when the buyers send suppliers an opening price.