Reverse auctions (also known as procurement auctions) are a type of auction commonly used in business-to-business transactions. Instead of a seller trying to fetch the highest price for his item from bidders, there’s a buyer who attempts to get the lowest bid possible from sellers.

Picture this: you work for a company that sells dog collars but who has decided to outsource manufacturing instead of making them in-house. You send out a design spec — sizes, materials, maybe colors — and in return, you receive quotes from suppliers. Your suppliers naturally want to make a profit too, so they start out their quotes on the high end, and if you were to negotiate with them one-by-one, it would take a long time, and you’d have less leverage to use against them.

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It seems that many new personal finance blogs have cropped up over the last few weeks, and the bulk of them seem to be debt-related, as in, follow-me-on-my-journey-to-get-out-of-debt. The appearance of so many new sites is normal and to be expected in a “growth industry” like blogging, and I’m certainly not criticizing anyone for creating a blog, nor putting their financial situation out there for everyone to see. Because if it works for them, that’s great, in all sincerity.

I’ve written a bit before about how it appears (anecdotally) that blogs about being in debt seem to get more interest than ones doling out boring, heard-it-all-before advice. This is just human nature at work. But does it really pay to spend hours a day reading about other people who are in worse situations than you?

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Ah, those wacky Brits. We have Dilbert, they have Alex.

Yes, over in London, they actually have a popular comic strip that makes fun of investment banking and all the crazy values and culture that surrounds working in the world of international finance. It’s been going strong since the late 80s, but unfortunately, Alex isn’t easily found over on this side of the pond: it’s not even available through Amazon.

I dunno. You think if the world of high finance and i-banking were more integrated into US daily life like this that people would be less afraid of it and kids would be more aspired to learn about it?

Most people’s understanding of auctions comes from personal experience, such as buying on eBay, at a live auction, or perhaps from seeing some of those fun BBC or PBS programs about buying and selling antiques.

But auctions aren’t just a way for people to find an old item on sale, or sell an old item for profit. They serve an important and interesting economic system at the business level as well. There are many, many types of auctions, but I’ll go through just a few of them here. Different types of auctions can even be combined to effectively change the results of the auction and bidding war due to the presence of information asymmetry (where one party may know something the other doesn’t).

So, to make the examples I’ll be giving clearer, I’ve chosen to illustrate them a bit unrealistically by using an envelope containing a $20 as the item up for bid. That way, there’s no doubt as to how much the item is worth, even though in real life, the absolute value of the item is seldom known ahead of time, if at all.

• English auction: This is the auction described above, where participants can openly see each others’ bids. Once a bid for an item is reached that isn’t countered by another bidder, the auction is over. Only the winning bidder pays the amount he bid for the item. Another name for this type of auction in economics is the “ascending-bid auction.”

  Example: Suppose I announce that I have an envelope with a $20 bill inside that I’m auctioning. People start bidding for it, maybe starting with $1. Others are willing to pay $5 for the $20 bill, etc. Pretty soon, someone might be willing to pay something close to $20 for that bill, say $19.50. If most people are rational, it’s unlikely that someone would be willing to bid higher than $20 for the $20 bill, let’s suppose the bidding stops at $19.50. The bidder of that amount pays me $19.50 and walks off with the $20.

• Dutch auction: In this type of auction, the selling price for a large amount of the same item is determined by the market (or bidders at an auction). The auction begins with a suggested, usually high price for the entire lot that descends until it reaches a price point at which a bidder is interested in buying at least a partial number of the item. This auction is also known as a “descending-bid auction”.

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This week’s Carnival of Personal Finance celebrates its one-year anniversary and includes a slew of great posts over the last year. Flexo’s done a great job as usual, and I’m honored to have been highlighted as a favorite.

I think this time, I picked my two personal favorites because they remind me of myself at different points in life.

I really enjoyed the posts from I Will Teach You To Be Rich not only because they’ve got good content but also because his writing smacks of a kind of irreverence and directness that reminds me of when I was an undergrad, before I outgrew my complete self-assurance and turned boring. That he’s got a geeky sense of humor doesn’t hurt either.

The older me relates to “A Rewarding Life” by the Budgeting Babe. I believe quite strongly in volunteering time as well. And surprising as it might be, I’ve found it’s often volunteers and not necessarily the ones who are being helped who benefit the most from the volunteering experience.

There are many, many other excellent posts that deserve revisiting from time to time, so be sure to check out this week’s special commemoration!