Forward and Reverse Auction

Forward Auction

• Forward auctions are auctions, which can be used by sellers to sell their items to many potential buyers.
• Sellers and buyers can be individuals, organizations etc.
• Items are commonly placed at a special site for auction (e.g. eBay.com or marketdojo.com or opt-source.com). 
• Buyers can continuously bid for the items they are interested in. 
• Eventually the highest bidder wins the item.
• Two types of forward auctions are common.
• The first is a liquidate auction. Here buyers seek to obtain the lowest price for an item they are interested in.
• The second type is a marketing efficiency auction. Buyers wish to obtain a unique item.

 Reverse Auction 

• A reverse auction is a type of auction in which the traditional roles of buyer and seller are reversed. 
• Thus, there is one buyer and many potential sellers. In an ordinary auction (also known as a ‘forward auction’), buyers compete to obtain goods or services by offering increasingly higher prices. 
• In contrast, in a reverse auction, the sellers compete to obtain business from the buyer and prices will typically decrease as the sellers underbid each other.
• A reverse auction is similar to a unique bid auction because the basic principle remains the same; however, a unique bid auction follows the traditional auction format more closely as each bid is kept confidential and one clear winner is defined after the auction finishes.
• For business auctions, the term refers to a specific type of auction process (also called procurement auction, e-auction, sourcing event, e-sourcing or eRA, eRFP, e-RFO, e-procurement, B2B Auction). 
• Open procurement processes, which are a form of reverse auction, have been commonly used in government procurement and in the private sector in many countries for many decades.