A Dutch auction is a method for pricing shares whereby the price of the shares offered is lowered until there are enough bids to sell all shares. All the shares are then sold at that price. It also refers to a type of auction in which the price on an item is lowered until it gets a bid. The first bid made is the winning bid and results in a sale, assuming that the price is above the reserve price. This is in contrast to typical options, where the price rises as bidders compete.
The goal of a Dutch auction is the find the optimal price at which to sell a security.
Process of Dutch bidding in reverse auction
In Dutch auction the auctioneer begins with a high asking price. The item being sold is initially offered at a very high price. Bids are not sealed. A type of auction in which the price on an item is lowered until it get its bid. The first bid made is the winning bid and results in a sale, assuming that the price is above the reserve price.This type of auction in convenient when it is important to auction goods quickly
The auctioneer begins with a high asking price. Price get lowered until some participants accept it. A sale never requires more than one bid. Winning participant pays the last announced price. Dutch auction has also called clock auction or open-outcry descending-price auction.
- Bidding is easier
- There is typically only one bid
- Bidders typically bid earlier
- Dutch auction tend to generate higher price