Reverse Auctions
In order to properly define unique characteristics of reverse auctions and why reverse auctions have become one of the most lucrative auction models in the world, it is important to touch upon other familiar auction sites you’d typically see on the internet like eBay, eBid, uBid or Yahoo. These types of auctions are categorically referred to as traditional auctions.
A traditional auction involves a “Seller” who is offering items for sale while potential buyers compete with each other for the purchase of the items. This causes the price of their items to continually increase in price ,until no buyer is willing to bid more. The auction concludes with the item being awarded to the “Highest Bidder.”
Characteristics of reverse auctions are in fact very similar to that of traditional auctions by the fact that reverse auctions also involves a “Seller” which for the purpose of this illustration will be PriceGoesDown.com.
PriceGoesDown.com offers items for sale on their online auction website attracting potential buyers who compete with each other for the purchase of a particular item, just like you’d see in a traditional auction. However, all similarities end here because in reverse auctions the price of an item is actually driven DOWN with each bid placed by potential buyers until a single lowest buyer is identified. At this time the auction concludes and the item is awarded to the “Lowest Bidder.”
To quickly summarize the key differences between the two:
In a traditional auction, the price for an item is continually driven up from the bids placed by potential buyers.
In a reverse auction, the price for an item is continually driven DOWN from the bids placed by potential buyers!!!
