What is it dutch Auction

The Dutch auction (in the classical sense) is a type of auction, at the beginning of which the highest price per lot is announced, which gradually decreases; the participant who is the first to stop the price reduction becomes the winner. The auction is called Dutch because it is most often used in the Netherlands for the quick sale of flowers.

When Is the Dutch Auction Applied at Prozorro.Sale?

This type of bidding is used in the Prozorro.Sale system as an alternative to the English auction (on a higher bid), when it is difficult to determine the minimum market price of the lot. The decision is taken if the organizer has twice announced an English auction, and no participant has submitted to it. In this case, a Dutch auction is announced, and the minimum starting price is determined by the participants themselves. A similar procedure can be used for commercial sales on SmartTender.

What Are the Stages of a Dutch Auction in Prozorro.Sale?

First of all, an auction announcement is published on the electronic trading platform, which indicates the book value of the object – the maximum price, which will then decrease. On a specific date and time, the Dutch type of trading begins, which consists of three stages:

1. 1. At the first stage, the starting price is gradually reduced from 100 to 20% of the book value of the object. The stage lasts six hours, divided into 80 equal time intervals. Through each interval, the price is reduced by 1%. Each participant at any time can stop the decline by clicking the "Buy" button. Whoever did it first becomes the winner of the first round of online trading. Let's call them Participant #1.
   2. At the second stage of the auction, other participants have the opportunity to offer a price higher than the one at which the decline in the first stage stopped. They do this through closed quotations that are at least one step above the auction price from the first round. Then the offers are revealed, and the winner of the second stage is the one who offered the most favorable price. Let's call them Participant #2.
   3. At the third stage, Participant #1 has the preemptive right to place the final bet. They can offer a price higher than the one proposed by Participant #2, and become the winner of the auction, or do nothing, and then Participant #2 will become the winner.

Does the Dutch Auction Apply in Prozorro?

Public purchases are carried out according to a different algorithm – the reverse English type of trading. The starting price is indicated in the announcement of the electronic tender, and the participants submit their price proposals, which cannot exceed it. Further, during the auction, participants continue to reduce their bids, and the winner is the one whose price turns out to be the lowest.