Every day 20 million tulips, roses, and other cut flowers are auctioned at the Dutch market called The Bloemenveiling. Each day 55,000 Dutch auctions take place, matching buyers and sellers.
A Dutch auction is one in which the auctioneer starts by announcing the highest price. If no one offers to buy the flowers, the auctioneer lowers the price until a buyer is found.
a. What method is used to allocate flowers at the Bloemenveiling?
b. How does a Dutch flower auction influence consumer surplus and producer surplus?
c. Are the flower auctions at the Bloemenveiling efficient?