What does a reverse auction typically involve?

A reverse auction typically involves multiple suppliers competing to offer the best price for a good or service, usually initiated by a buyer looking to acquire those goods or services. In this situation, the buyer sets a target price or range, and suppliers then place bids, often lowering their prices in response to competitors' bids. This dynamic fosters competition among suppliers, encouraging them to reduce their prices in order to win the contract, ultimately benefitting the buyer through reduced costs.

The other options do not accurately describe the nature of a reverse auction. For instance, a seller negotiating with a single buyer suggests a traditional purchasing scenario where the price may be negotiated in a back-and-forth manner without competitive pressure from other suppliers. Similarly, a single supplier reducing their price does not capture the competitive aspect that characterizes a reverse auction, where multiple suppliers are actively vying for the buyer's business. Lastly, fixed price contracts with no competition do not reflect the bidding environment of a reverse auction, as this scenario implies a stable pricing strategy without the dynamic price adjustments that occur when multiple suppliers compete directly against each other.