A Dutch Auction Information Exchange

Abstract

SOME organizational details of a style cut flower and potted plant auction suggest that bidders learn by observing prices. Price movements also suggest that learning, measured as a decline in the relative variation of prices paid for homogeneous goods, takes place while the auction proceeds. Five days each week during a few morning hours members of the United Flower Growers Cooperative assemble to trade under the rules of Dutch bidding. One grower, for example, may bring two hundred lots of eighteen-inch long-stem cut roses of a specified grade with six units per lot. These flowers roll through an arena where a few dozen bidders wait behind terraced rows of desks or tables, each desk equipped with a button used to signal a purchase order. Above the stream of flower carts and facing the bidders is a device, appearing like a clock, with a face more than a meter across. The single hand of this measures seller asking prices. The auction house sets the hand of this clock at an arbitrarily high price. The arm then swings rapidly to successively lower prices until someone pushes the button signaling a purchase.2 The bidder then indi-