Dutch Auction, explained.
A Dutch auction sells to the first bidder who accepts a descending posted price.
Why it happens
Your private value is 80 and the price falls from 100 in five-unit ticks. Rival acceptance thresholds are 45 and 50. Accepting gives value minus price; reaching a rival threshold ends the sale first.
A Dutch auction sells to the first bidder who accepts a descending posted price.
Read the result
Your profit is eighty minus the accepted price; passing a rival’s threshold ends the opportunity rather than giving you a cheaper item.
A worked example
Stop a descending price clock
Lower the initial one-hundred-unit clock in five-unit ticks while your value stays eighty.
Accept at fifty-five to win against the scripted highest rival threshold of fifty.
In a reset attempt lower to fifty and observe the rival purchase, separating this bot demonstration from an equilibrium bidding prescription.
OPTIONAL DEEPER DETAILGo deeper: inside the model
Inside this model
Your private value is 80 and the price falls from 100 in five-unit ticks. Rival acceptance thresholds are 45 and 50. Accepting gives value minus price; reaching a rival threshold ends the sale first.
Where this idea is useful
A practical use
Compare the tradeoff between a lower price and losing access to an item, while inspecting the precise clock and tie rules.
A common misconception
“Waiting always improves the auction outcome.”
A lower price improves surplus only if the item remains available. A rival can end the auction before the next acceptable tick.
What this explanation leaves out
- Rivals use disclosed-after-play scripted thresholds rather than strategic equilibrium bids; five-unit ticks determine the cheapest possible winning price.
Why is fifty-five the cheapest winning price here?
The discrete clock lets a rival accept as soon as a tick reaches fifty. Fifty-five is the preceding tick, under the declared ordering rule.
What information would change how long you were willing to wait?
Associated thinkers
Associations marked provisional are awaiting source review.
Further reading
Explore the original research or the teaching reference behind this experiment.