Certified Supply Chain Professional (CSCP) Practice Exam

In the context of auctions, what does a Dutch auction involve?

1. A multiple-item auction where prices are raised

2. A single seller starting with a high price that decreases

3. An auction format with no time limit

4. An auction where buyers propose prices to sellers

The correct answer is: A single seller starting with a high price that decreases

A Dutch auction is characterized by a unique bidding process where a single seller begins the auction with a high initial price, which is systematically lowered until a buyer accepts the current price. This approach contrasts with other auction types, such as English auctions, where bidders raise their bids in response to one another. The effective strategy behind a Dutch auction is to attract buyers who are willing to accept a lower price in exchange for the immediacy of securing the item before it is sold to someone else. This format can be particularly effective for selling items quickly and can drive a sense of urgency among bidders. The other options represent different auction types or concepts that do not accurately describe a Dutch auction. For example, raising prices pertains more to an English auction, while a time-limited auction does not align with the Dutch format's pricing mechanism. Additionally, the notion of buyers proposing prices to sellers is more reflective of negotiation behavior rather than an auction format. Hence, the distinct function of price reduction from a high starting point in a Dutch auction solidifies choice B as the most accurate representation of this auction type.