Auction, Dutch

In this type of auction the sale commences at a high price and the price is then progressively lowered until a competitor bids and in doing so indicates that they are prepared to buy at that level. That bidder is then said to have won the auction and is required to pay the price that has been agreed. In procurement terms the phrase is sometimes used for the discouraged practice of ‘price shopping’. For instance, supplier A quotes a price of $100 and supplier B quotes $105. The buyer then approaches supplier B and invites them to re-quote in the light of the fact that another supplier has quoted a price of $100. If supplier B offers a price of $95, the buyer then approaches supplier A, and so on. This is seen as unprofessional as it involves disclosing confidential information and undermines trust in the relationship. See also Trust.