This is done by allowing the seller to have a reserve bid, which is simply a floor price below which the commodity is returned unsold to the would-be seller. If a reserve bid is used, it is announced before the bidding begins. The second method can be described by using the Dutch clock system as an example. The Dutch clock is a circular dial with an indicator which points to prices on the perimeter. When a commodity or lot is offered for sale, the indicator points to a price above the expected final price.
Competitive bidding takes the form of guessing the maximum price others are willing to pay.
There is only one bid made in this declining-price method, which is, of course, the highest price any of the potential buyers is willing to pay. The bid is made by pushing a button which stops the indicator at the price the buyer selects. This system is used in Ontario to sell flue-cured tobacco, cheddar cheese and flowers. Hogs are assembled in a number of local yards, combined into lots and offered for sale. Information about each lot is sent by teletype to all interested buyers.