Posted in Finance, Accounting and Economics Terms, Total Reads: 993
Definition: Reverse Auction
It is a type of auction in which there is a reversal of roles of buyers and sellers. In a typical forward auction (normal auction) many buyers compete to buy services at highest possible price. But in reverse auctions many sellers compete to sell their product or services to its customer. Here the price normally drop as each seller try to woo its buyer with lesser price.
In reverse auction all the basic principles of auctions remain the same as that of normal (forward) auction.
Reverse auction normally happens when number of seller are more than the available buyers in which sellers compete for the order.
Eg: With advancement in internet technologies companies have gone for e-auction which is a form of a reverse auction. Here buyers ask for e-bidding for its requirement from multiple vendors to get the lowest possible price.