Dutch auction can refer to two very different processes used in the auction world. Originally, a Dutch auction referred specifically to a type of auction that starts with a high price that keeps going down until the item sells. This is the opposite process to regular auctions, where an item starts at a minimum price and bidders wrestle over it by increasing their offers. In a Dutch auction, however, the auctioneer offers the item at a certain price and waits for somebody to agree. If nobody does, then he lowers the price and asks again. This continues until a participant says "yes" and thus wins the item. There are no battles over items in a Dutch auction; the first person to accept the offered price wins the item.
A Dutch auction is common when items are not expected to reach a high price or when something needs to be sold rather quickly. Most auctioneers shy away from Dutch auctions because they believe the final price is always lower than it would be in a regular auction. The US Customs uses Dutch auctions to dispose of unclaimed items that have been in storage for over a year. Many police auctions are also conducted this way. Because the main objective in both cases is to sell these objects quickly in order to make room for new ones, the lower profits generated are secondary.
Dutch auction can also refer to a type of online auctions that has become popular over the past few years, especially in eBay. In these auctions, several identical items are offered for sale together, and bidders have the option of buying any number of them, from a single unit to any combination they desire. An online Dutch auction gives the seller the opportunity of listing the items only once rather than having to pay for several postings. If there are more items than bidders, then the items are sold at the minimum price. When there are more bidders than items, then the last bid will increase the original price of the item.
