Dutch Auction

Published by Mario Oettler on

A Dutch auction works with a price clock ticking backward. The clock starts with a high price, and every second, the price drops by a tiny amount. The bidder that hits the button first receives the item and has to pay the price that was displayed at the clock.

The strategy with this auction type is to bid strategically. If a participant waited exactly until the price dropped to his willingness to pay, he wouldn’t make any profit. Hence, he will wait until the price is a bit lower than his willingness to pay. Of course, he risks that another participant hits the button first and buys the item. Therefore, each participant must not wait too long before hitting the button.

You can get an idea of how the price clock works in flower auctions in Aalsmeer, Netherlands.

Bid open/sealedOpen
Bids increase or decrease –
Bid orderPrice decreases
WinnerBidder with the highest bid
Final pricePrice of the highest bid
End of auctionFirst participant bids
StrategyBid strategically