Auction with one buyer and multiple sellers In the standard auction model, there are one seller and multiple buyers, the bidders are the buyers.
Consider now an auction with one buyer and multiple sellers, where the bidders are the sellers. Does it fundamentally changes the nature of the auction compared to the standard model? What changes does it make?
Such a setting is called a &quot;procurement auction&quot; or &quot;reverse auction.&quot;
It does not fundamentally change anything. Instead of buyers with privately known valuations, the auctioneer faces sellers with privately known costs. Hence, bidders underbid each other. An efficient auction is then (typically) one where the bidder with lowest costs wins. An optimal auction is one where the winner has the lowest virtual cost, $c + \frac{F(c)}{f(c)}$, the procurement analogue to Myerson's virtual value, $v-\frac{1-F(v)}{f(v)}$, where $F$ is the cdf of the private type (valuation or cost). The first paper on procurement auctions that comes to my mind is Luton &amp; McAfee, JPubE 1986, but I am sure people were aware of reverse auctions as a &quot;mirror image&quot; of standard forward auctions long before that.