The Psychology of Bidding.......

[conor912]

Originally Posted by bn2cardz

Another issue is when you are allowed to put in a ceiling bid but it only does every other increment. This happened on an auction recently where I really wanted a card and wanted to put in the bid where it would make the next amount too high... yet the bid I wanted was between two ceiling bid options. I was very frustrated when someone outbid me with that between amount. I knew that was the amount I wanted but couldn't do it. Yet the next bid was way too high due to the increments.

I just encountered this for the first time last week bidding with REA. I, too, thought it was weird, so I called them and asked why they do that. They said they don't allow the same bidder to hold two consecutive auto-bidding positions to prevent ties and make it more fair for other bidders. I pressed further and asked why a tie wouldn't just go to the first bidder and he said "just so that there's no question" which I thought was a pretty weak answer. When I asked further, he matter-of-factly admitted that the whole reason was just to garner higher bids. Something about the whole situation rubbed me the wrong way.

[DeanH3]

I know I'm a difficult buyer. I'll ask about every possible imperfection that shows on a scan to make sure I know what I'm buying. I'd rather be a pest and have my concerns answered rather than not ask and be disappointed.

Once I'm all in on a card, I'm definitely guilty of paying a premium if it has the "look" I want. One in particular is my red cobby. I looked and waited for years to find one that met my criteria, centered, focused and bold color. Good thing sharp corners were not a criteria. When it popped up I went overboard and I have no regrets.

[BruceinGa]

What a stunning Cobb!!

[Robert_Lifson]

Originally Posted by conor912

I just encountered this for the first time last week bidding with REA. I, too, thought it was weird, so I called them and asked why they do that. They said they don't allow the same bidder to hold two consecutive auto-bidding positions to prevent ties and make it more fair for other bidders. I pressed further and asked why a tie wouldn't just go to the first bidder and he said "just so that there's no question" which I thought was a pretty weak answer. When I asked further, he matter-of-factly admitted that the whole reason was just to garner higher bids. Something about the whole situation rubbed me the wrong way.

REA’s bidding system is designed differently than other auctions (but not for the reasons stated in your post). I don’t know who you spoke to but there was definitely a miscommunication. (Of course it was probably that darn Brian Dwyer. He's a loose cannon. Constantly making stuff up).

It is accurate that we have designed our system so that a bidder cannot take two consecutive bidding increments. (I should add the words “on their own” because if for some reason a bidder really wishes to actually top their own bid, which is occasionally requested for some strategic reason, we can communicate this request with our auction software host and they can make this happen, but it is a very rare request.)

Without a special request, a bidder can simply not top their own bid at REA. The software is specially designed to not allow this. The reason is very simple: it is for the protection of the bidders. We don’t want anyone topping their own bids by accident. There are other auction software programs that exist that do not have this safeguard, and in those auctions it is not uncommon for bidders to top their own bids by accident. Most of the time, of course, they don’t realize they have topped their own bids. The REA system is designed (and has always been designed) to not allow this to happen. On your own, it’s impossible for you to top your own bid at REA. If anything, this keeps prices lower than they otherwise would be at REA, as no one is ever topping their own bid by accident. Similarly, at REA we do not allow bidders on their own to place what are often called “straight bids” that can be any number of increments higher than the next bidding increment. To us, placing a “straight bid” much higher than the next increment is simply the equivalent of placing multiple consecutive bids. Our software does not allow bidders to place “straight bids” at higher levels.

One question we sometimes get is why a bidder can’t take two consecutive increments for an UPTO bid. This is a very different issue. The reason we don’t allow bidders to take two consecutive increments as upto bid choices (and I hope I am explaining this clearly) is that to me, this just doesn’t make sense. The whole purpose of an “upto” bid is that if your bid is topped, your upto bid will instantly come in and top that new bid. If bidders are not required to respect the bidding increments, the entire upto bidding system fails. We are well aware that many auctions (maybe most) do not feel the same way, or for some other reason the software they utilize does not address upto bids in the same way as REA. We think those systems are flawed. The flawed software systems (and for clarification, I am the using the word “flawed”. I think the auctions that use it are fine with it; they would not call it “flawed”) allow a bidder to place a bid with an upto bid at any level desired. The “upto” limit has no reference to the bid placed. Because of this, in these auction systems a bidder can use an upto bid to take up two consecutive increments. So “Bidder A” can bid $1,000 on an item with an “upto” of $1,100. If “Bidder B” tops the $1,000 bid with a bid of $1,100, in these flawed systems, “Bidder A” (who was previously high bidder at $1,000) becomes the high bidder at $1,100, and “Bidder B’s” $1,100 bid (which topped “Bidder A’s” $1,000 bid and triggered “Bidder A’s” $1,100 “upto bid”) takes a back seat to “Bidder A’s” $1,100 “up-to” bid. Even though both bidders have $1,100 bid limits (an occurrence that does not happen at REA as the REA system does not allow this), Bidder A’s “upto” bid takes precedence and has priority. To me, this is not fair, and we would never allow this.

For greater clarity, the best way to explain this (as I know it is a little confusing) may be the following: At REA, the system is designed to treat the increments and the bidding process similar to that of a live auction (though in “slow motion” over a period of weeks). Imagine an auctioneer asking the audience for the minimum bid of $1,000. At REA, when a bidder places a bid of $1,000 with an upto bid, the menu of upto bids available is unique to that bidder. Everyone else sees a different menu of bidding increments. (Think “odd” and “even”). So when a competing bidder bids $1,100 at REA, no one can take that $1,100 slot away from them. They are high bid at $1,100. If the $1,000 bidder had an upto bid of $1,200 (or $1,400, or $1,600 etc), the system will instantly top the $1,100 bid with a bid of $1,200. Under no circumstances does the $1,000 bidder get to bully the $1,100 bidder and take the $1,100 spot also. They can bid higher ($1,200) or not, but the new bidder has the $1,100 spot. Otherwise, to give the live auction analogy, it would be like Bidder A at $1,000 was hoping the auctioneer was about hammer the lot down at $1,000 (“going once, going twice…”) and competing bidder B raises his hand to bid $1,100, and then Bidder A elbows Bidder B, knocks him out, and announces loudly to the room “Don’t listen to him. His bid does not count! It is I that is bidding $1,100”. Even though it was his bid at $1,000 that Bidder B topped with a bid of $1,100. That wouldn’t be fair at a live auction. And it wouldn’t be fair at REA. That’s why we have our auction bidding increments set up the way they are.

I wrote this up very quickly and I realize I may have not covered all the nuances of our system (there are many) and the philosophies behind why we have designed our bidding systems the way we have. There’s no one “right” bidding system. But a tremendous amount of time and thought (and investment - we had to pay for all of our desired software customizations) has gone into the design of our systems; and the philosophy that ruled all decisions was always dictated by what I thought was fairest to all bidders, what provided protections to individual bidders, as well as to all other bidders, and to the integrity of the bidding process. I have studied how other auction systems work (at other auctions I’ve even accidently topped my own bids, and have had my own bids “bumped” aside by “upto” bids left by the very bidders I topped; I have even had other bidders win item at the same level I bid). I like REA’s system best for bidders by far. We would always consider making changes if we thought they were improvements, but our bidding system with reference to increments and upto bids works exactly as we desire it to.

One final note: If the menu of upto bidding increments does not offer the desired level a bidder wishes to land on, there are ways to address this (this can be remedied by just waiting until the next bid comes in to jump in). If you want to place an bid of $1,000 upto $1,300, this is not possible at REA because $1,300 is not an “upto” increment for a bidder at $1,000. The $1,000 bidder can choose from a menu of upto bids that includes $1,200; $1,400; $1600; etc. If the bidder really wants his upto bid to have the right to potentially land on $1,300 (and the $1200 and $1400 increments are just not OK), then the bidder would have to let someone else bid $1,000. And THEN they could come in with a bid of $1,100 with an upto bid of $1,300.

Sorry this is so brief! (the scary part is this just scratches the surface! But I thought I'd post this in case it was helpful or informative to anyone).

Sincerely,

Robert Lifson

Robert Edward Auctions LLC

www.RobertEdwardAuctions.com

[conor912]

Rob,
The time and effort that went into writing this does not go un-noticed. Thank you.

[MattyC]

I also appreciate the time and effort that went into that response. Yet as a bidder, I see it somewhat differently and would take the counterpoint...

If "Bidder A" makes an $1100 max bid and is currently leading at $1000, he still claimed that $1100 slot first. He was the first person to stake out and claim that max, that slot. He was the first to pledge his money at that level. Therefore, he should be rewarded for that-- and the reward comes in the form of winning in a tie situation. The tie should favor the man who stepped up first. So when "Bidder B" comes in at $1100, "Bidder A"' should still now lead at $1100, as his max gets triggered.

Same scenario should happen if "Bidder A" makes a bid of $1000 and is leading. Then he decides he's willing to pay more, and subsequently ups his max to $1100. He still was the first one to be willing to pony up $1100, so his bid should take precedence over any later comer. "Bidder A" isn't "bullying" other bidders; he stepped up first with his money.

[Stonepony]

Originally Posted by MattyC

I also appreciate the time and effort that went into that response. Yet as a bidder, I see it somewhat differently and would take the counterpoint...

If "Bidder A" makes an $1100 max bid and is currently leading at $1000, he still claimed that $1100 slot first. He was the first person to stake out and claim that max, that slot. He was the first to pledge his money at that level. Therefore, he should be rewarded for that-- and the reward comes in the form of winning in a tie situation. The tie should favor the man who stepped up first. So when "Bidder B" comes in at $1100, "Bidder A"' should still now lead at $1100, as his max gets triggered.

Same scenario should happen if "Bidder A" makes a bid of $1000 and is leading. Then he decides he's willing to pay more, and subsequently ups his max to $1100. He still was the first one to be willing to pony up $1100, so his bid should take precedence over any later comer. "Bidder A" isn't "bullying" other bidders; he stepped up first with his money.

1+

[seablaster]

Originally Posted by MattyC

If "Bidder A" makes an $1100 max bid and is currently leading at $1000, he still claimed that $1100 slot first. He was the first person to stake out and claim that max, that slot. He was the first to pledge his money at that level. Therefore, he should be rewarded for that-- and the reward comes in the form of winning in a tie situation. The tie should favor the man who stepped up first. So when "Bidder B" comes in at $1100, "Bidder A"' should still now lead at $1100, as his max gets triggered.

Same scenario should happen if "Bidder A" makes a bid of $1000 and is leading. Then he decides he's willing to pay more, and subsequently ups his max to $1100. He still was the first one to be willing to pony up $1100, so his bid should take precedence over any later comer. "Bidder A" isn't "bullying" other bidders; he stepped up first with his money.

I agree with this wholeheartedly.

The same situation could still arise in a live auction. Suppose bidder A is winning at $1000. Bidder B and bidder C are both interested at $1100. If Bidder B get his paddle up a fraction of a second before bidder C, bidder B is still the high bidder despite the fact that the other party wished to execute an equivalent bid.

In all of the scenarios described, all the parties not currently winning still have the opportunity to bid. By allowing a party to occupy a bid increment of their choosing, it doesn't prevent any interested party from bidding further.