What is a reverse-auction?

I’ve been playing with eBay for some time so am quite familiar with the idea of online auctions. A friend of mine mentioned that you can also get reverse auctions on other sites. What are these and how do they work?

Clipart of bills and coins
Image via Wikipedia

If you remember from your experiences on eBay, a seller would list his item and buyers compete with each other to obtain the item on sale. The price of the item rises are the auction proceeds with the seller getting the highest value that the current bidders are ready to pay. This is the ordinary sort of auction that most people are used to, sometimes called a forward auction.

A reverse auction works in the opposite manner. A buyer will list his requirements and different sellers will compete to provide the good or service at the most competitive price. The price of the item tends to decrease as the bidding continues, with the buyer getting the best deal for his money.

Let’s take an example, with a website called City Move, designed to put clients in touch with New York Movers who can help them move to and from new York. The people making the move sign up to the site and leave details on locations, items and any requirements they may have. Different movers will then bid on the job, offering their services for better and better prices. The client then selects one of the movers (using the bids and reviews from other people on the site) and completes the transaction knowing he’s getting the best price.

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