Dutch auction

Reverse of the traditional auction model in which an auctioneer starts with a high price and steadily reduces it until they receive a bid. The name derives from the flower markets in Amsterdam, the Netherlands, that are operated on this basis. It is traditionally used for goods with a limited life such as cut flowers and fish. It is also a popular model for Internet auctions.

As the price descends the bidders may have to come in at a higher price that they would in a traditional auction where they have the opportunity to bid low and then increase the bid if necessary. However, research has shown that with risk-neutral bidders and equal information, the same expected price would be realized by a private bidder buying for private consumption.

The term can also be used to refer to a Vickrey auction, a uniform second-price auction. This involves bidders making sealed bids with the highest bid winning but paying the amount of the second highest bid.