Dutch Auctions
A Dutch Auction
occurs when a seller wants to sell multiple copies of the same item,
to many buyers. The main difference between a Dutch Auction and a
Standard Auction is that all items sold are identical, and there can
be many winning bidders. In a Dutch Auction, all winning bidders get
their items at the price of the lowest winning bid. There is no Automatic
(Proxy) Bidding or Reserve Price for Dutch Auctions. In order to remain
as one of the high-bidders, you must frequent the specific dutch auction
listing and check its Bid History, in order to place another bid,
if necessary.
Example, a Dutch auction has 10 items for sale.
The opening price for the items is $1.00 each.
After the auction opens, 20 people place equal bids for the items at $1.00 each.
If the auction were to close at this point, the first 10 people to bid would be declared the winners,
because earlier bids take precedence over later bids of equal amount (and in this case, quantity).
However, before the auction closes, a new bidder places a bid of $3.00 for one of the items.
Because this person has the highest bid, he/she will most certainly win one of the 10 auction items.
The remaining 9 items are won by the first 9 bidders who bid at $1.00.
However, because all bids clear at the lowest winning bid,
the person who bid $3.00 will only be required to pay $1.00 for the item.
By bidding over opening price, new bidders can essentially knock the earlier low bidders out of the running.
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