Examples of Auction and Reverse Auction Broker models
Examples of the Auction and Reverse Auction Broker models are described below.
An Auction site supports a personal online trading community. Buyers and sellers interact one-to-one, auction-style.
Reverse Auction sites allow customers to name their own price for a family vacation, new car or to finance a house.
A reverse auction is a type of auction in which the roles of buyer and seller are reversed. In an ordinary auction (also known as a forward auction), buyers compete to obtain a good or service by offering increasingly higher prices.
In a reverse auction, the sellers compete to obtain business from the buyer and prices will typically decrease as the sellers undercut each other.
A reverse auction is similar to a unique bid auction as the basic principle remains the same, however a unique bid auction follows the traditional auction format more closely as each bid is kept confidential and one clear winner is defined after the auction finishes.
In business, the term most commonly refers to a specific type of auction process . The following list contains the names of the various types of auction processes:
- procurement auction,
- sourcing event,
- e-sourcing ,
- B2B Auction
used in government or private sector procurement.
In consumer auctions, the term is often used to refer to sales processes that share some characteristics with auctions, but are not necessarily auctions.
Reverse Auction Variant
The reverse auction is a variant, in which a buyer places a request for bids for a product and receives competing bids from a collection of suppliers. By contrast, the (PTX) private trading exchange or private hub is a term used to describe a relationship exchange used for exchanging information and automating transactions with a long-term supplier. The use of a broad transactional exchange for eprocurement has many potential benefits, especially if the product has commodity-like characteristics with many suppliers, many of which have additional capacity.
Where price is the primary consideration, transactional exchanges can generate significant savings. Goods such as those for maintenance, repair, and operations (MRO) meet these criteria . However, there are important qualifications to the hoped for benefits. Many of the public exchanges established to provide such markets failed to generate adequate aggregation of buyers or sellers.
Additionally, the realized gains from reverse auctions may be much less than expected. Firms using an online reverse auction may achieve significant gross savings, only to find those savings reduced by hidden costs associated with switching suppliers. The relationship with suppliers in an arm's length public exchange is generally adversarial, and this is compounded by the fact that use of an exchange for e-procurement sets suppliers