Reverse Auction

A reverse auction is a type of auction in which sellers compete to offer the lowest price for their goods or services, and the buyer selects the seller with the best offer. Unlike traditional auctions, where buyers bid higher prices, a reverse auction drives prices down as sellers lower their bids to win the contract. Reverse auctions are commonly used in procurement processes by large organizations looking to minimize costs on goods and services.

Example

A company looking for a new IT service provider holds a reverse auction, where multiple vendors bid lower prices to secure the contract, resulting in significant cost savings for the company.