The simplest form of dynamic pricing is negotiation, which occurs whenever a buyer and a seller intend to do business but have not yet agreed on a price. Once a buyer selects a producer for the transaction, the parties exchange offers and counteroffers electronically until an agreement is reached on price, product grade, payment terms, and delivery date. In forward auctions, one seller offers items for sale, and multiple buyers place bids. The highest bidder wins. In a Dutch auction the bidding starts at a high price and is progressively lowered until buyers exist for all items.
All buyers receive the lowest bid price.
A Vickrey auction is like an English auction, except that the winner pays the second-highest amount bid, to avoid bidder's remorse. A Japanese auction begins at a low price and increases in fixed amounts. At each increase, bidders unwilling to pay that price drop out until the last, winning bidder remains. In a sealed-bid auction, each bidder makes a single, secret bid, and the highest bidder wins once all bids are received. Because no bidder can see the other bids, sealed-bid auctions do not drive the price up through competitive bidding.