waterexchange's digital technology enables buyers and sellers to quickly and efficiently trade a variety of water products. All products are traded dynamically using a variety of auction formats. The trading site also contains useful information about how to buy and sell on the site. Read on to find out more...
what is dynamic pricing?
In a dynamically priced market, the price of goods is determined by competition within the marketplace.
There is no 'fixed price' in a dynamic marketplace. However, a 'starting price' can be used to commence bidding. Dynamic pricing mechanisms ensure that goods are traded at an optimal price that is determined by the market.
Examples of dynamic markets include 'auctions' or 'exchanges'.
what is an auction?
An auction occurs when there is a 'one-to-many' trading scenario. This may include either:
- one seller and many buyers
or - one buyer and many sellers (this second format is commonly called a 'reverse' auction).
what is the difference between an auction and an exchange?
An auction can only work where a one-to-many relationship exists. However, when there is a 'many-to-many' trading environment (for example, when there are many sellers and many buyers) an exchange is needed.
Exchanges enable commodity products to be efficiently traded at a price determined dynamically by the market. The most well known types of exchange are financial exchanges like the London Stock Exchange.
In an exchange many offers and bids can be made at the same time. When a bid is made, and successfully matched to an offer, a deal is done, and the trade is 'cleared' from the system.
english or dutch?
There are many different ways to run an auction. waterexchange uses two of the most common: English and Dutch auctions.
english auction
In an English auction, a starting price is chosen which is well below the expected clearing price. The price is then bid upwards (or downwards for a reverse auction) in an open outcry with each auction participant bidding slightly higher than the last. The highest bid placed when the auction closes wins the 'prize'.
dutch auction - not in use on the trading floor
A high initial price is chosen to start a Dutch auction. The price then starts to decrease (or increase in a reverse auction) at a set rate. All the auction participants watch the price falling and when it hits a level they are willing to pay, the participant places a bid. The first person to place a bid at the current level wins the prize!
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You may also post Classified Ads on the trading floor.