Find Great Deals on an Auction

Take Advantage of Dutch Auctions

When sellers offer multiple units of the same item, the Dutch auction is one of the best methods to sell off the lot. As a bidder, your job is not only to understand the rules of Dutch auctions, but also to equally employ effective bidding tactics that can help you maximize your chances of winning while minimizing your final cost.

Dutch Pricing and the Winner's Circle

First off, a quick reminder about the rules of winning in a Dutch auction: For starters, the winning bidders need to pay only the lowest successful bid price at the auction's close. Although you might have bid as high as, say, $30, if the lowest winning bidder won at $20, then all winning bidders pay $20 for each item they've won.

To win, you need to ensure you're in the "winner's circle"--the population of bidders who have successfully secured the right to claim some quantity of units up for auction. Remember that the highest bidders will be able to claim whatever quantity of units for which they had bid, the second highest for their quantity of desired units, and so on down the line until all units have been claimed. If you're the lowest winning bidder, you'll be able to claim only the quantity that is left, which might be less than what you originally desired. Still, you're in the winner's circle and you'll be getting at least some quantity of the goods.

Bubble Economics

In Dutch auctions, the economics of supply and demand commingle with the concept of the auction "bubble." Simply put, when multiple bidders have accounted for the complete quantity available in a Dutch auction, they create a competitive coexistence that leaves one or more bidders precariously hanging on at the low end of the winner's circle, they're deemed as being "on the bubble." This means that they're winning status easily can be negated by another bidder who bids slightly more than they did, thus knocking them "off the bubble" and out of the winner's circle. Difficult to picture? How about a simple table to illustrate the bubble? For purposes of demonstration, assume an available quantity of 12 units and a minimum bid of $25:

A quick look at the table shows Bidder #1 is on the bubble, easy to knock out of the winner's circle with a bid of $26. Of course, if you decide you want to bid that amount in this auction scenario, then you'll be on the bubble. The better strategy is to bid outside the bubble--that is, to bid higher than the lowest bidders, yet not as high as the highest bidder. (Remember that you only need to pay the lowest successful bid price.) Therefore, in this mock auction, your wisest bid (as new Bidder #6) would be for $29, resulting in the new scenario in this updated table:

Sniping, Dutch Style
If the bubble strategy isn't enough of an edge for you, you always could snipe a Dutch auction. That's right--you can place your well-flanked Dutch bid in the closing moments of the auction for maximum effect. Again, the bidder(s) on the bubble will be knocked out of the winner's circle and you'll still have the other bidders protecting your backside in case any other Dutch snipers are lurking in the shadows alongside you.

Yankee Doodle Dupe
Finally, your best bet in ensuring you pay the lowest successful bid price is by ensuring you know exactly what that price should be. Some sellers, whether accidentally or intentionally, might ask each bidder to pay his or her exact bid price for the units won, regardless if the lowest successful price is lower--this is wrong! That approach is used in Yankee auctions--each bidder in the winner's circle pays their exact bid price (and, yes, the winning bidders all could be paying different prices). Remember that in Dutch auctions, you pay only that lowest successful bid price. And, as Dutch auctions can be a bit confusing to some sellers, your winning bid is ultimately protected if you understand the Dutch rules better than the seller.