What is a reverse auction?

In a reverse auction, a buyer puts out a request for a specific good or service, inviting businesses to compete against each other with bids for the amount they are willing to accept to deliver what is being requested by the specified time line. In the end, the contract goes to the seller prepared to accept the lowest amount.

What is a forward auction?

Forward auctions are the opposite of a reverse auction. In a forward auction, the auction is initiated by the seller and the buyers bid the price up. Reverse auctions can make a lot of sense when there are many sellers in the market and price is the most important factor.

Does competition affect reverse auction success?

In a reverse auction, the sellers compete to obtain business from the buyer and prices will typically decrease as the sellers undercut each other. Their findings appear to support that argument, as competition correlated strongly with the reverse auction success, as well as with the number of bidders.

Who invented e-procurement reverse auctions?

The pioneer of online e-procurement reverse auctions in the United States, FreeMarkets, was founded in 1995 by former McKinsey & Company consultant and General Electric executive Glen Meakem after he failed to find internal backing for the idea of a reverse auction division at General Electric.