Posted by John Nichols on December 02, 2005 at 04:55:30 from 70.191.148.241 user Mcneacail.
In Reply to: Re: Dutch Auction posted by Robert Dilley on December 02, 2005 at 03:24:35:
RAB or Reverse Auction Bidding is just as Robert says, the problem with it that it becomes a game and not an auction. The problem is there are now many sellers and one buyer. So the buyer is trying to push the price down as low as possible and the sellers are trying to win the work. Unfortunately, like chess good players can make a lot of money.
Let us say a fair price to shear the sheep is $100. Let us say in a RAB the first bid is $120. If no one else bids you are stuck with the price. Unless there are at least 6 bidding in the game then we know from actual runs that tacit collusion occurs quickly. We get divers but the group leaves them with the winner's curse.
It is a lousy way to do business.