It's first come first served, unless we're talking about trademarks.
If these aren't examples of a "free market" please explain your understanding of the term and why domains are excluded.
Sedo - The world's leading domain marketplace
Afternic boasts over 3 million domain names available for purchase on their aftermarket platform.
Bido is a 1 a day, domain name auction service
DomainMonkey is a domain auction and parking website
NameJet allows its customers to backorder a domain name and set a price up to which they are willing to go