Dutch (descending clock)

Price falls until someone claims the item; equivalent to a first-price auction.

Bidding your true value is not dominant here. A bidder who knows something about their rivals can do better by bidding something else, and the worked example below shows what and why.

A worked example

The clock runs the other way: the price starts high and falls until somebody claims the item. Nothing is learned while it falls, because a bidder who is still waiting has said nothing.

What the mechanism does, step by step

1. collect bids Nothing is submitted on paper. Each bidder privately knows the highest price at which they would still take the item, and says nothing until they claim it.
2. clock start The clock opens at 150, above anything anyone would pay, and falls from there. The first bidder to speak gets the item.

   clock = 150, falling

3. clock falls Nobody speaks at 150, so the clock ticks down. The first price any bidder is willing to pay is 75.

   clock: 150 -> 75

4. pick winner A accepts at 75 and the clock stops. Nobody else ever gets a chance to say anything.

   first to accept = A

5. price rule A pays the price they chose to stop the clock at, which is their own bid — no rival's limit is ever revealed, let alone used. Deciding when to stop the clock is exactly the problem of choosing a sealed first-price bid, so a descending clock is the same mechanism as a first-price auction, shading and all.

   p = clock at acceptance = b_A = 75

6. payments A pays 75; nobody else pays anything.

   revenue = 75

How it came out

A claims at 75 and pays 75. Deciding when to claim is deciding what to bid in a sealed first-price auction, and for the same reason — you pay what you say, so you say less than the item is worth. The two mechanisms are strategically identical; only the theatre differs.

Run this auction step by step

The link carries the whole setup, so you can change a bid and watch what moves — and send the result to somebody else.

Settings

Read next

• First-price sealed bid — Highest bid wins and pays its own bid, which rewards shading below your value.
• English (ascending clock) — Price rises until one bidder is left; equivalent to a second-price auction.