The CNBC piece makes two arguments that are persuasive as to why Dutch auctions didn't pick up a host of fans following Google's use.
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Dutch Auctions are known for being wild events, with heated bidding wars and drunken revelry.
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Herodotus relates an account of a descending price auction in Babylon, suggesting that market mechanisms similar to Dutch auctions were used in ancient times.Histories of Herodotus, trans. Henry Cary (New York: Appleton, 1899), p. 77; quoted in Ralph Cassaday, Auctions and Auctioneering (Berkeley: Univ.
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Dutch auctions are the reverse of English auctions whereby the price begins high and is systematically lowered until a buyer accepts the price. Dutch auction services are usually misleading and the term 'Dutch' tends to have become common usage for the use of a multiunit auction in a single unit auction as opposed to how it is originally intended for that of a declining price auction. However, with actual on-line Dutch auctions where the price is descending, it was found that auctions have on average a 30% higher ending price than first-price auctions with speculation pointing to bidder impatience or the effect of endogenous entry on the Dutch auction.
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Dutch auction is also sometimes used to describe online auctions where several identical goods are sold simultaneously to an equal number of high bidders. In addition to cut flower sales in the Netherlands, Dutch auctions have also been used for perishable commodities such as fish and tobacco.
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If nobody accepts the initial bid, the seller successively reduces the price in $1,000 increments. When the price reaches $10,000, a particular bidder—who feels that price is acceptable and that someone else might soon bid—quickly accepts the bid, and pays $10,000 for the car. Dutch auctions are a competitive alternative to a traditional auction, in which customers make bids of increasing value until nobody is willing to bid higher.
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An online auction (or also electronic auction or e-auction or eAuction) is an auction which is held over the internet. Like auctions in general, online auctions come in a variety of types like ascending English auctions, descending Dutch auctions, first-price sealed-bid, Vickrey auctions and others, which are sometimes not mutually exclusive. The scope and reach of these auctions have been propelled by the Internet to a level beyond what the initial purveyors had anticipated. This is mainly because online auctions break down and remove the physical limitations of traditional auctions such as geography, presence, time, space, and a small target audience.
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Edward Chamberlin is thought to have conducted "not only the first market experiment, but also the first economic experiment of any kind." Vernon Smith, drawing on Chamberlin's work, but also modifying it in key respects, conducted pioneering economics experiments on the convergence of prices and quantities to their theoretical competitive equilibrium values in experimental markets. Smith studied the behavior of "buyers" and "sellers", who are told how much they "value" a fictitious commodity and then are asked to competitively "bid" or "ask" on these commodities following the rules of various real world market institutions (e.g., the Double auction as well the English and Dutch auctions).
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