A Dutch auction is a type of auction in which the auctioneer begins with a high asking price which is lowered until some participant is willing to accept the auctioneer's price, or a predetermined reserve price (the seller's minimum acceptable price) is reached. The winning participant pays the last announced price. This is also known as a clock auction or an open-outcry descending-price auction.

This type of auction is convenient when it is important to auction goods quickly, since a sale never requires more than one bid.

Auction process

In a Dutch auction, the item being sold is initially offered at a very high price, well in excess of the amount the seller expects to receive. Bids are not sealed, as they are in some types of auctions. The price is lowered in decrements until a bidder accepts the current price. That bidder wins the auction and pays that price for the item. For example, suppose a business is auctioning off a used company car. The bidding may start at $15,000. The bidders will wait as the price is successively reduced to $14,000, $13,000, $12,000, $11,000 and $10,000. When the price reaches $10,000, Bidder A decides to accept that price and, because he is the first bidder to do so, wins the auction and has to pay $10,000 for the car.

An auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder. The open ascending price auction is arguably the most common form of auction in use today. Participants bid openly against one another, with each subsequent bid required to be higher than the previous bid. An auctioneer may announce prices, bidders may call out their bids themselves (or have a proxy call out a bid on their behalf), or bids may be submitted electronically with the highest current bid publicly displayed. In a Dutch auction, the auctioneer begins with a high asking price for some quantity of like items; the price is lowered until a participant is willing to accept the auctioneer's price for some quantity of the goods in the lot or until the seller's reserve price is met. While auctions are most associated in the public imagination with the sale of antiques, paintings, rare collectibles and expensive wines, auctions are also used for commodities, livestock, radio spectrum and used cars. In economic theory, an auction may refer to any mechanism or set of trading rules for exchange.