Years ago, purchasing something at auction was a relatively rare event. Auctions were something you would go to during your vacation in the countryside and what typically came to mind when the term "auction" was mentioned was the purchase of horses, cattle or cars. Today that has all changed with the introduction of web based auctioneers such as EBAY and Yahoo auctions, people are now buying everything from art to clothes to xylophones. Who knows, EBAY may even offer an occasional horse or zebra for sale.
AUCTIONS ARE BECOMING INCREASINGLY MORE POPULAR
With the ever increasing popularity of auction as a method of exchange comes the ever increasing need to learn about auction bidding strategy. All of us probably have our favorite auction story relating to either how we made out like bandits or like fools, with the latter probably the more frequent occurrence. I have managed to do both despite being the son of a New York City auctioneer and one who would like to consider himself an expert in the ways of the auction.
For example, in one particular coin auction, the auctioneer put up for sale a large box filled with hundreds of coins which he claimed were "unsearched" and contained many key dates. Upon seeing the box, my heart beat faster and faster, and in my emotionally excited state, I never bothered to ask myself how the auctioneer knew that the box contained key dates if it was supposedly "unsearched".
I bid from the beginning to the end and in the end, that's where I got it, paying probably three times what I originally wanted to pay! The box contained all common date coins and not one coin was a key date except for a damaged penny in which someone scratched a design in the form of a key across the face of lincoln. Real funny huh!
So what do we learn from this example?
First, when bidding, let your ego remain at home. Many people get into a bidding war with others, not necessarily because they believe that the merchandise is worth it, but rather because they do not want the "other guy" to win. It's ok if the other guy wins, especially if you have to pay many times the value of the lot to prove otherwise.
Secondly, and relatedly do not let your emotional side get the best of you. Many people feel a rush when a lot they wish to purchase is shown to them. If you let your emotions drive you bidding you are guaranteed to purchase the product for much more than you originally wanted to. What should be done to avoid this, is to inspect the lot in advance (if possible) and then to write down a price that you feel is the maximum you would be willing to spend on the item. Then write down a second price which is 10% higher allowing you, in the heat of the action, to increase your bid to that upper level.
Such an approach lets you avoid the feelings of cognitive dissonance when someone else has bought the lot. You know, those thoughts that, if I just bid a little higher, I would have owned the lot.
THE ELUSIVE MR. PLOTKIN
On another occasion, I was bidding on an old fashioned antique wall based circular dial telephone which the auctioneer claimed was a "one-of-a-kind" item. The bidding got very active and the "lucky" buyer purchased the item for $1,350 going beyond my ($1,000 + 10%) or $1,100.00 self-imposed limit. I dejectedly walked up to the auctioneer after the lot had sold and quietly asked him when and if he ever thought he would get another item just like the one just sold.
To my chagrin, he told me that he had 7 others in the back room just like it which he would gladly give me for the same price as the "original""sold for. I also noted that several of his items were sold to a "Mr. Plotkin" although I never noticed Mr. Plotkin or anyone else for that matter bidding on these items. My dad, who was an auctioneer then informed me that Plotkin was an anogram standing for the fact that the lot had been passed by the auctioneer, meaning it had not sold. P…stands for "passed" and lotkin stands for "lot". It was the auctioneer's way of sapeaking in code to his workers that a bill should not be written up for that item. I guess an auctioneer is having a bad day when a Mr. Plotkin purchases all of the lots at his/her sale.
What this story implies is the possibility that there is always the potential for phantom bidders to be bidding against you.
For example, in a live auction the auctioneer may acknowledge bids against you which never really were made. In the heat of the moment no one typically takes the time to see who is bidding against them and simply raises his or her own bid in response. On a web auction, one could easily get a friend who is a registered auction user to bid against a real bidder to see if they can raise the bid.
Of course the problem with this game is that if the real bidder decides to stop bidding at that point in time, the seller is left with a winning phantom bid which amounts to no bid at all.
The question remains, as a buyer, how can you protect yourself from this phantom bid problem. The answer (aside from pursuing legal action) again lies in formulating your own bid in advance, and not going above it no matter what happens. That way even if you do purchase a lot inflated in price by a phantom bid, at least you are not paying more than you originally intended to or indeed more than what you previously thought was a fair price.
SOME BIDDING STRATEGIES- APPLICABLE IN PERSON AND/OR ON THE INTERNET
In any auction you participate in, there are some simple bidding strategies which you can follow which will help you to win the lot at a lower price! First of all, it is important to wait till the last moment to bid (with some exceptions as discussed below). This makes logical sense, because everytime you bid, your bid counts against you. Bidding encourages others to bid, so if you bid early and someone bids against you, you will have to bid again to be high bidder. This is potentially avoided when you bid at the last moment.
Secondly, suppose that you have a fixed amount of money and you are concerned that if the bidding increases a little bit at a time, your bidding limit will quickly be exceeded. Here you can use a strategy in which you immediately bid to your limit. For example, suppose that you are interested in the purchase of a coin and you have a limit of $10.00.
Suppose that the first bid begins at $1.00 quickly followed by bids of $2.00 and $3.00. If you do not act quickly, it becomes clear that in a few short moments, your bid of $10.00 will be exceeded as the bidding escalates in $1.00 increments. Therefore, you might blurt out a bid of $10.00 (your limit) after the $3.00 bid to signal to others that you are serious about the lot and that you will outbid anyone (by an excessive amount) who comes near you bid. This is oftentimes a successful strategy for someone at the auction who is on a fixed dollar budget.
When bidding on the internet, both of the above strategies are applicable, however there are two others which apply only for this auction medium. First, when you are a buyer, try to bid in non-round amount. This is because you want to avoid tied bids and the chance that the other bidder will win the lot because his/her bid was there first. Hence, if you plan to bid $9.00 for an item, bid $9.02 because someone else may be clever enough to bid $9.01.
When you are a seller, make sure that your lot ends at a reasonable hour across the country so that everyone is up, awake and on their computer when the auction comes to a close. The reason for this is simple, most bidding in internet auctions comes at the end, and if a significant portion of the potential audience is asleep at that time, the action at the end of the auction will be restricted.
Hopefully, these auction strategies and helpful hints are useful to you in your next trip to the auction. They are all based on my personal experience and more importantly are solidly anchored in marketing theory. When the gavel comes down, hopefully you are the lucky winner of the merchandise of your dreams.
