Auction Opening Bids
 

Posted By: <b>Jay</b><p>I was just digging into my pile of unread magazines and I came upon the August 14 edition of Forbes. In it I found an article about an auction site that runs auctions for various charities. The interesting thing is that the site's marketing director embarked on a joint project with an assistant professor from the Harvard Business School to identify what affects an auction's success. Although the article does not go into all their findings, it does mention one suggestion that they make---Set Higher Opening Bids. They note that while lower opening bids tend to whip up a frenzy, these lower opening bids do not generate the highest prices. This seems to fly in the face of the policies of several major auction houses who start lots at tiny fractions of the lot's true value. What do you guys/gals think of this?

Auction Opening Bids
 

Posted By: <b>robert a</b><p>Hey Jay,<br /><br />If the opening bid is high, but reasonable within the scope of the what the item should end for, then I think it's a good thing.<br /><br />If the opening bid is set at an overly optimistic closing price, then I would shy away.<br /><br />Robert

Auction Opening Bids
 

Posted By: <b>barrysloate</b><p>I think a lot will reach its final resting place no matter what you start it at.

Auction Opening Bids
 

Posted By: <b>Jay</b><p>Barry--I've heard that arguement before. Auctioneers do not want to risk a lot not selling so they start bidding very low to avoid that possibility. After the fact they can always argue that the market is what the market is. This independant academic study says otherwise. As an auctioneer who I'm sure wants to maximize your consignor's realizations, are you going to try to obtain a copy of this study?

Auction Opening Bids
 

Posted By: <b>Edacra</b><p>Was the article talking about internet auctions, or just live auctions? Poor Barry gets a lot of guff around here. Who cares if he wants to read the article when he could have probably written the article.<br />

Auction Opening Bids
 

Posted By: <b>cmoking</b><p>I don't know where I read it, but I thought there was another study done on ebay auctions with the conclusion that the lower the starting price, the higher the ending price.

Auction Opening Bids
 

Posted By: <b>Jim Clarke</b><p>Interesting study. I tend to stay away of some items that do not have a lot of bidder activity. If you start a lot out at a higher price, then someone who is on the bubble in buying it might not want it, thinking that A) That is the reserve price B) That is a retail price and not much of a deal C) It's not really a true auction to let the market "set" the price. D) All of the above.<br /><br />On the flip side, most lots come down to two people. No matter what you start it at, the final outcome will be about the same. More of an advantage to a buyer I think if started out at a higher price. It might limit the amount of bids people make in an auction if higher starting out bids. I know I bid on 50-100 lots per BIG auction. God forbid if I won them all at my starting out bid price.. No matter how good the deal was.. <img src="/images/happy.gif" height=14 width=14><br /><br /><br /><br />

Auction Opening Bids
 

Posted By: <b>Gilbert Maines</b><p>There are lots of variables in an auction. Id like to see how they set up a controlled study of this activity. But Im not sure that Forbes is the source for that information.

Auction Opening Bids
 

Posted By: <b>Jay</b><p>Sometimes what intuitively seems correct proves to be wrong. I would be very surprised if this study was not academically sound. One reason why a higher opening bid might lead to a more favorable result for a consignor is that the opening bid conveys a message from the auctioneer to the bidder as to the auctioneer's valuation of the material. The valuation of cards or memorabilia is not an exact science; IMHO this message is a significant determinant of the final result.

Auction Opening Bids
 

Posted By: <b>Gilbert Maines</b><p>Oh, I am sure Jay that it is academically defensible; and it is probably assailable as well. Most likely they did not attempt to set up a controlled study. My guess is that they married statisticians, modelers and other eggheads, mathematiced it up, and drew conclusions.<br /><br />Who knows, it could even be right!<br /><br />But one thing is certain - I will never understand how they did it.

Auction Opening Bids
 

Posted By: <b>barrysloate</b><p>Jay- different auction items have different inherent characteristics. Some items that reach the auction block have limited appeal and are put out there just because the owner wants to get rid of them. Obviously, a higher opening bid might psychologically have an effect on the final bid, especially if nobody really knows the value of the item. Vintage baseball cards, as we all know, have a maniacal following, and they are simply in too much demand for more than a neglible amount of money to be left on the table. REA had a number of 19th century pieces that had opening bids of around $1000 or thereabouts and some went for over $40K. Specifically I am referring to a few of the 1871 CdV's, the 1874 Athletics cabinet, and the Mike Kelly imperial. Do you think if they started higher they would have sold for more? I think the study would apply more to lots that are not in as high demand as vintage baseball cards. Next time you have an N172 Anson in Uniform for sale start it for an opening bid of $1. Let's see if the buyer walks away with a bargain.

Auction Opening Bids
 

Posted By: <b>leon</b><p>I was going to post almost exactly what you said but didn't. I have watched many baseball cards start out at a few hundred dollars and go for 20k or more.... I think you hit it on the head.....

Auction Opening Bids
 

Posted By: <b>barrysloate</b><p>The study may also not take into consideration one of the idiosyncracies of our hobby's catalog auctions- that bidders must first put in a qualifying bid before they can take part in the second phase of the auction. That's the main reason why I and others start low. I am not trying to create a false illusion that a card will go for a bargain, but making room for as many qualifiers as possible. The more bidders that qualify, the more who are likely to participate on the final night. Am I right 100% of the time? Probably not, but that has always been my auction model.

Auction Opening Bids
 

Posted By: <b>warshawlaw</b><p>would have been a study of the various techniques for closing used by auctioneers. Is the best price realized by closing all lots at once, closing them staggered, forcing them into overtime where the only bidders are those who bid during regulation play time, etc. <br /><br />I will say this as a consignor: I am reluctant to place my items in an auction where the auctioneer lists the start very low and I cannot dictate a reserve. I think the reason why the study showed that low starts = low finishes is that a certain percentage of lots will sell for a fraction of their "market" given these low starting bids (and bad descriptions; see below). If I had something of real value and rarity for one of these auctions, I would insist on a reserve of my choosing.<br /><br />Another factor not taken into account (perhaps cannot be taken into account) but of critical importance is the quality of auctioneer descriptions. With all due respect to my friends who actually write these things, many times I see an auction undersell a lot because the auctioneer does not do a good job of describing the items. My latest auction winnings were a great example of this situation: I was thrilled to find multiple uncatalogued cards in the lot. Had they been properly described I am certain that the lot would have drawn more bids. It isn't limited to one auctioneer, either. I see lots of rare and obscure materials routinely misdescribed, not placed in context, etc. Not that I'm complaining as a buyer, but as a seller I have been very pissed in the past when the auctioneer misdecribed my stuff and cost me money. If I am auctioning anything of significance I would insist on having the last say on the description.

Auction Opening Bids
 

Posted By: <b>Jay</b><p>Barry--Unfortunately we will never know what lots in prior auctions would have gone for if the opening bids had been higher. Perhaps they would have gone higher than they actually did. Personally I believe that the less that is known about the value of a piece, the more information that is communicated by the opening bid. One lot that comes to mind is that sheet of silks that REA auctioned off that went for about $200K. My guess is that if that lot had opened at $1 it would have sold for alot less than it did.

Auction Opening Bids
 

Posted By: <b>barrysloate</b><p>Jay- that was a fair example but what we both did is take extreme cases. What is more relevant is how the more typically encountered lot would do- say an N28 Mike Kelly in PSA-5. And we would have to auction the same lot simultanesously at two different opening bids to find out, something which is of course impossible. It's difficult to even compare auctions- if somebody auctions a card in January and I have an identical one in February, mine may suffer simply because the winning bidder of the first one is no longer participating. There are just so many variables. If I have a card that I hoped would sell for $2000 and it only reaches $1500, the only thing that went wrong is I couldn't find someone to come in at $1650. Would that have changed if my opening bid was $500 instead of $250? How do we know. Actually, I would like to read the study. Is it currently on the newstand?

Auction Opening Bids
 

Posted By: <b>Martin Neal</b><p>Adam,<br />I, also, have oftened wondered at the poor descriptions offered by some of the auctioneers. It seems to me that a consignor should have the opportunity to review the item description prior to the actual advertising for the auction. I have never consigned anything to an auction house as I have very few things that they would be interested in, but if I did, I would proof the ad first.

Auction Opening Bids
 

Posted By: <b>T206Collector</b><p>A point I often make about Buy It Nows applies to this thread. Auctions almost never obtain the highest price someone is willing to pay for an item. They only obtain a nominal increase above the second-highest price someone is willing to pay. Thus, just about every auction leaves some value on the table, that the buyer walks away with in addition to the won item. Theoretically, a well-placed high starting price (or, as I have said before a good BIN number) will get from the highest bidder the maximum he was willing to pay for an item, which would be higher than the nominal increase above what the second-highest price someone would be willing to pay was.<br /><br />Example for illustration purposes.<br /><br />Joe would pay $10,000 for a T3 Cobb.<br /><br />Jim would pay $8,000 for a T3 Cobb.<br /><br />No one would pay more than Joe or Jim.<br /><br />If this item were listed at a starting price of $5,000, and both Joe and Jim bid their high bid on this as a proxy auction (like ebay), then Joe would win the item for $8,100 (or $8,250, whatever the automatic proxy increase is). However, if the starting price were $9,000 or even $10,000, then Joe would still buy the item for that price, and the seller would earn $750 to $1,750 more than if he had a lower starting price. (Same thing with a BIN of $10,000)<br /><br />Of course, starting at $11,000 (or a BIN at $11,000) will be a zero bid auction, so there is a lot of guess work here. But if you know your market and your buyers, you should be able to eat away at that high bid maximum.

Auction Opening Bids
 

Posted By: <b>Peter Thomas</b><p>Typically the auction with items that sell for $200,000, also has many items that will sell for far less. I think that the low opening bid brings in bidders on items that they can not afford, but gets them to look at or for items that they can afford and thereby increases overall auction action. I know that I have bid on many items that I know I could not afford, but would love to have, and then study more realistically items that I might be able to obtain.

Auction Opening Bids
 

Posted By: <b>barrysloate</b><p>Ebay is a different animal than a catalog auction because of the advent of the snipe bid. You can't snipe in a catalog auction. A lot of times I see a card valued at $2500 on ebay with a starting bid of $2500. I consider that a retail sale, not an auction. It's perfectly valid, but the seller is really just looking for that one bid. And that is not in the spirit of a true auction.

Auction Opening Bids
 

Posted By: <b>barrysloate</b><p>With regard to Adam's complaint about lots being written up poorly I agree that consignors should have some say in how the lots are presented and I even encourage it. Often my consignors have specialized in certain areas and know more about a set than I do, and I solicit their input.

Auction Opening Bids
 

Posted By: <b>Jim Clarke</b><p>Yes, Martin hit it right on the head. All consignors should have a right to proof their right up, on their stuff. I remember consigning many T3's and they did not even mention the Ad back. I would have picked up on this if I would have pre-read the description instead of reading it in the catalog when it came to the house. As a buyer, I like to see the lower price and know that there is a chance I can pick up the lot at below market value. Many times the underbidder will want something else and not push as hard on other lots. I think a strong tactic that most people do not do (including me) is put a strong high bid on the item to force most people out of it and not allow them a chance to bid... IE: 500.00 open bid and just come in at 12,500..

Auction Opening Bids
 

Posted By: <b>barrysloate</b><p>JC- People have tried that and there are two ways it can backfire. First, you could bid $12,500 and blow everyone away, but if you bid normally you might still be the winner at say $7500; and second, you can bid $12,500 and create the false impression that the card is worth a ton, and then somebody will come along and bid $13,750 and you find just to come back in you would have to pay way more than you wanted. That strategy works sometimes but not always.

Auction Opening Bids
 

Posted By: <b>Steve M.</b><p>What kind of auction are you bidding at where an item has an open of $500 and you can put in a $12,500 bid that future bidders have to bid up from? Is that an option at Mastro, REA, Lelands or any of the other on-line auction houses? I never win in the big auctions and maybe my ignorance of how it works is why. <img src="/images/happy.gif" height=14 width=14>

Auction Opening Bids
 

Posted By: <b>dd</b><p>I agree with Barry with a caveat--an appropriate buyer population.

Auction Opening Bids
 

Posted By: <b>leon</b><p>Many years ago was my only success at putting in a very high opening bid the first day. I called Lew and asked what my top, straight bid, could be? He said anything over the first increment and I could do what I wanted....so this lot went from about 1k to 8k on the first bid....and ended right there....it was 8 of these 10..Lew asked me twice, on the amount, as he couldn't believe I was going to pay that much.......(btw, most auction houses will let you do incremental straight bids almost as high as you want to, from the first bid on...)<br /><img src="http://www.network54.com/Realm/tmp/1158090487.JPG">

Auction Opening Bids
 

Posted By: <b>barrysloate</b><p>Anytime you want to bail out at your excessive 8K bid, please call me. As your friend I feel it is my obligation to make that offer. No auction house will ever turn down a high bid. Why would they?

Auction Opening Bids
 

Posted By: <b>Jim Clarke</b><p>Doing a "straight" bid I think is accepted at most major auction houses. I recall seeing an Old Judge lot go from 500.00 to 20,000.00 with only 2 or 3 bidders. I'm not sure if there was a high proxy bid in there.. All I know is I was not. Barry, I have never used that logic in bidding nor will I ever. I would rather run it up to it's final price at closing time. <br /><br />Now if Hal would have done a straight bid on the Boston team cabinet of 13k when it was at 7K then I probally would not have gone for it.. But I ended up trying to get it one bid at a time until it was close to 20K.. Then I stopped... Not knowing that only one more bid would have done it... <br /><br />JC