Auction

The idea of auction is usually associated with a competition among many buyers who bid for some scarce item with the highest prices affordable. It works best for the seller in a tight market where demand outstrips supply. By awarding the goods to the highest bidder, it helps the seller to charge efficiently what the market can bear.

This is usually how high value items (like paintings and other art work) are traded and how government land and infrastructural projects are awarded to developers. But auction is also prevalent for wholesale transactions (as in the morning fish markets in Japan) as well as consumer purchases (as in eBay).

Where the economy is slow and consumers' appetite for purchasing low, however, auction in the conventional sense may not work best for the seller in tapping the purchasing potential of the market. There simply may not be enough willing buyers to push the bidding prices higher.

In such environment, what the seller should want to find out is how much those sparse buyers are really prepared to pay for the goods on offer. In which case, the auction process should be reversed with the seller stating the asking price at the outset and allowing the buyers to bid it down. But it cannot be an open bidding process, ie, the individual buyers cannot be allowed to know the bidding prices of each other. In the end, as usual, the seller awards the goods to the buyer offering the highest bidding price.

What is useful to explore is about to what extent "the bidding down process" could stimulate demand in a weak market. Well, just think about the bargaining process one may be prepared to engage with those seasoned hawkers in any bizarre.