Better Bidding Practice on Huggins & Scott Auction

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Posted By: Ted Zanidakis

What a refreshing change......this is the 1st major auction in a long time that does not require 10% bidding increments.
Just wanted to mention this, as the 10% bidding on all the other auctions has been a bone of contention with me, and
has caused me to avoid them.

TED Z

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Posted By: barrysloate

Ted- sometimes that 10% works in your favor. I think the two Sovereign lots you won from me may have been topped if the next bidder only had to raise his bid a tiny amount, because at least one person thought about it hard and ultimately passed.

So if not for the 10% increment in my auction, you would not have completed (almost) your Sovereign set! It cuts both ways.

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Posted By: Red

Less than 10% bid increments would help to ease the pain of an ever increasing buyer's premium. If a card is sitting at $1000, placing the next bid means you're paying as high as $1320 for the card. If that's a little too high then being able to bid $1050 to pay $1260 might squeeze out another bid. In one way it makes it easier for you to win but it also makes it just as easy for you to lose.

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Posted By: Ted Zanidakis

Exactly the point I have been trying to make on numerous posts on this Forum these past two years

Not only does....COMPOUNDED....10% bidding double the starting bid every 7 bids....it quadruples the
starting bid every 14 bids. Then, as you have clearly shown....it is FURTHER COMPOUNDED when they
include the "juice".

I've bid on several lots on this Huggins & Scott auction (which ends today and tomorrow); and, I was
pleasantly surprised to see that this auction has fixed bidding increments (as in Ebay)....that are con-
siderably less than the usual 10%.

This bidding feature will certainly motivate me to participate more in their auctions. I have stopped
bidding in any auction that requires 10% bidding increments.

TED Z

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Posted By: barrysloate

So Ted- have I lost you as a bidder?

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Posted By: Ted Zanidakis

You know better than that; as, you always come up with some neat stuff......But, I refuse to bid on
other auctions until they modify their bidding increments. Maybe you should give this (lower the bid
increment) a try in your next auction

And, to answer your 1st posted question here....it's really a "catch 22" whether lower bid increments
would have prevented me from winning your large Sovereign lot. Upon seeing that lot of 348 cards
(262 Sovereign's) in person, I would've bid up to what it would take to win it.

Another factor to consider when bidding at 10% increments is that many times unrealistic high prices
will be realized on a given card (or item) simply due to this compounding effect. And, unfortunately in
many cases, this will set a new "highwater mark" for that item that is not necessarily representative
of its real value.

Confuscius says...."COMPOUNDING is good when saving $$$$....not good when spending $$$$".

TED Z

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Posted By: barrysloate

Ted- the way my software is set up the increments are reduced to 5% after 10K, but only a few lots reach that level. I suppose it would be possible to reduce all increments to 5%, but unless I am missing something, would that have much effect on the final bids? They would either end up the same, or be 5% higher or lower. I guess on a $5000 lot, you could save $250, but there's an equal chance the lot may go $250 higher. In the end, it's probably going to work out about the same.

I realize ebay allows you to raise a bid something around 1-2%, but that would not be practical with a catalog auction. Or would it?

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Posted By: Matt

I don't see why it wouldn't be practical. I think the 10% think is a vestige of auctions run before the internet - when receiving hundreds of tiny raises would result in a paperwork mess.
The 10% system has another serious flaw, which hasn't been mentioned yet. Certain items have pretty much a set value - take a PSA 3 '33 Goudey Ruth as an example. In a 10% auction, there is only 1 bidding slot close to that value, so whoever hits that first is going to take the lot since no one is going to be willing to overpay by $100-$200 just to get a card that they can easily procure elsewhere. If you allowed 1-2% increments then several people would have a shot at the win and someone probably would be willing to overpay say $30 to get the card.

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Posted By: barrysloate

Matt- while I don't think I will go to the 1-2% format, I may speak to my web designer and see if all increments can be reduced to 5% levels. It may not be a bad idea.

Can I see a show of hands- who thinks 5% increments across the board would work better? Of course, I may have feedback from my consignors too, so I will have to balance both.

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Posted By: Ted Zanidakis

With the lower (5%) increments you will find more bidders participating....and, the resulting final prices will be
near the same as before, or even more.

Years ago, AT & T discovered when they reduced long-distance rates, they actually increased their revenues.

And, its been proven with the Tax debate in this country....when you lower taxes, the government, invariably,
increases its revenues.

TED Z

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Posted By: barrysloate

That's good to know, and I will take the advice seriously. One can always fine tune an auction. Thank you.

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Posted By: Eric B

Regardless of the method, it all evens out. Sure, maybe if it is sitting at $1,000 you might not want to take it to $1,100 but maybe you are the one at $1,000 and it doesn't go any higher because of the 10% increment. At 5% increments someone else will bid $1,050 and now you need to go to $1,102.50.

Or to use an example from above. You take it to $1,050 but someone is willing to add 5% to take it to $1,102.50. At 10% increments maybe you will win it at $1,050 because nobody is willing to do to 1,155.

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Posted By: Matt

Eric - I don't think anyone is arguing that using 5% increments vs 10% will change the final hammer price significantly (at least when averaged). Thea argument is that it gives more people a chance to bid close to the final price, which makes for a better auction experience.

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Posted By: leon

I don't think 5% increments would do any harm. I haven't heard any persuasive arguments that would make me think it would be a bad thing....I would vote to try it...I would probably even vote to do it if I were a consignor....It might get more people into the "action"....ya never know....I don't think it would hurt though....regards

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Posted By: barrysloate

I'm thinking of trying it too, but maybe 10% up to a $1000, then 5%. I start many lots at $100-150, and those would move really slowly. But I'll give the whole process some thought. I think it could encourage a little more bidding.

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Posted By: Ted Zanidakis

That New Poll on the "Gretzky Wagner" is OLD.....I don't think you can get much more than the 600 unique respondents.
And, if you could, it isn't going to change the current results, anyhow.
So, my suggestion is to put this subject (5% bidding) up for debate on a new poll.

TED Z

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Posted By: Eric B

I still don't think it will make a difference. You say that it might price in a few more bidders. But even with your argument it would only price in 1 more bidder - the first one.

But ignoring that. Let's say there are 4 bidders willing to go to $1,050 (from the first example). So if it's at $1,000 you will get another bid to get it to $1,050. But that assumes that due to the starting bid and prior activity, it was sitting at $1,000. What if it was sitting at $1,040? Then nobody is willing to go to $1,092. Same with $1,020, nobody going to $1,071. Or even $1,001, nobody willing to go to $1,051.50.

It's only when the price ends up between $950 and $1,000 that the 5% increment helps for those folks willing to go to $1,050. Or half the time it helps and half the time it doesn't.

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Posted By: Matt

Eric - even if it only "helps" half the time, what's the downside?

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Posted By: Eric B

Because it hurts the other half. If you are one of the $1,050 guys and you are high bidder at $1,020 you may lose it to a $1,080 guy but not if it was a 10% increment bid to $1,122.

Everyone always looks at it from "just one more bid at a smaller increment and I would do it". But sometimes you are at that point and a small increment gives it to someone else.

Overall it's a wash.

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Posted By: Matt

Eric - the point is not that making 5% increments means you will win more auctions - that would be impossible since not every bidder can win more auctions! The point is that it would make them more competitive - since you have an extra person able to partake at the end hitting that in between value.

edited for grammar

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Posted By: leon

Maybe we can just do a new poll in a thread (about the percentages associated with auction fees)? That new tab poll (place) is likely to become the new "read only" Detecting Alterations and Forgeries area in the next few days, hopefully sooner....we are all but finished with the skeleton of it and then we will be adding more info as we go. We have been working on it (again) the last several days.....regards

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Posted By: Joann

I think smaller increments can only help both seller and bidders.

With 10% increments plus the 10-20% buyer's fees on top of it, there is not enough precision or resolution in the system to really accurately zero in on actual value. There comes a point where the perceived value of a card is above the current bid but lower than the next available bid. It seems to me like this happens a lot - like there is a race to a ceiling and whoever gets in the last bid without having to overshoot wins it.

Of course, this doesn't apply when a few bidders "have to have it". But when there are mental calculations of value in play, I think that large increments stop the bidding artificially short. When the next increment is $100 to $120 higher - you can kind of get the sense that maybe something might go $1100 but $1200 seems like too much - having the option to bid higher but not too high would probably induce the next bid.

So for sellers, it would probably (in most cases but not all) result in a bit more money because the last bidder was willing to go x/2% higher but not x% higher.

But two definite downsides:

First, ebay makes people crazy because someone can outbid you by a very small amount on a fairly large purchase. The lose-by-the-proverbial-nickel can be aggravating. But in a regular auction with no snipe opportunities, this would be minimized. (Although imagine setting your max and going to bed, and waking up the next morning to see that you lost the card by a minimal amount.)

Biggest downside? By far - and serious. The 10 minute or 30 minute rule - even if by lot and not whole auction - would go on forever if the bidding increments got too small.

10% feels like too much. I don't know what would be too little. 5% certainly seems like a good start.

Joann

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Posted By: barrysloate

This discussion has been helpful, and I too see little downside and more upside. I just need to decide at what level to begin the 5%. I don't think it matters too much for a lot that is sitting between $100-200, but at some point those larger increments start to add up.

Anybody have thoughts about that? Starting the 5% at $500? At $1000? Or some other point? Please keep the feedback coming.

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Posted By: Marc S.

Your description of the Laffer curve is perhaps a bit simplified. What the theory is basically predicated upon is the following two postulates.

A) At a 0% tax rate, the government receives no revenues. This is obvious.

B) At a 100% tax rate, the government receives no revenues. This is perhaps less obvious -- but the theory is that no one would have an incentive to work under such a scenario.

The implication, therefore, is that there is a theoretic curve between 0 and 100 % of tax rates that lead to the maximisation of revenues by a government. Unfortunately, the economy is too complex to isolate this single cause and its resultant effect. This was precisely the theory that led to Reaganomics, and it is still debated somewhat fiercely to this day. There is not an obvious solution as to where the efficient frontier lies from a government perspective. If, for no other reason, given the US's changing stance on tax rates over the last 25 years...and our relative tax rate compared to so many other countries of the world.

(This same argument can be expanded to nearly every supply/demand commodity...some of which the results are easier to quantify)

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Posted By: Jeff Lichtman

My only thought on the subject: imagine the 30 minute rule in place on an entire large auction in which each subsequent bid came at $100 intervals: if a new bid was placed every 20 minutes or so....you could have an extended bidding period that would last until the following year's auction.

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Posted By: Matt

Now that this thread is totally off-topic;
Why should the government determine how much to tax us by figuring which amount would get them the most money? Let's say it could be pinpointed that taxing everyone %42 gets the government the most money any more and people will stop working, and less and there would be less income. That doesn't mean the government should tax us that much.

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Posted By: Matt

Jeff - perhaps now is the time to debate the 30 minute rule as well. It was never clear to me why, in a bidding war, you needed 30 minutes to make up your mind whether to bid or not. Even with 10% increments these auction end so late. I would think 10 minutes would be more then enough to go to the restroom, eat some food and place your next bid, and the auctions would end so much sooner. Maybe even 5 minutes...

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Posted By: Eric B

Matt, I prefer to NOT eat my food in the bathroom.

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Posted By: Ted Zanidakis

I am not an economist....I am a retired Electronics Engineer....and I have a long memory.

In the early 1960's Kennedy reduced TAXES and this gave a big boost to the US economy.

In the 1980's Reagan reduced TAXES several times and the US economy was pulled out of the dregs of the Carter days.

During 2001 to 2004, Bush reduced TAXES several times and the US economy has overcome a recession, the disastrous
effects of 9/11 and a war. This economy is doing great with only 4.6% unemployment, the DOW at 14,000, and despite
OIL at $85+/barrel....gas at the pumps is still averaging $2.60/gal., nationwide.

You can quote all kinds of theories and curves....the simple fact is everytime TAXES have been reduced the American
public benefits, you cannot argue with history on this subject.

And remember, we can spend.....save.....or otherwise enjoy our hard earned money better.....than this bureaucratic,
inefficient government that we have.

TED Z

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Posted By: barrysloate

Matt- I use the 15 minute rule, and in the last two auctions that it was in place, each ended roughly 11:45 PM. That is a good ending time, as it is only slightly late for the east coast and very manageable in the other three time zones.

But most auctions do run too late, kind of like major league playoff games.

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Posted By: Matt

Eric - if it was a 5 minute extension then you probably would have to eat in the bathroom, but 10 minutes is enough to eat after you go to the bathroom. More time then that is just a waste; what possible need is there for more then a 10 minute extension every time a new bid comes in?

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Posted By: Scott Mt. Joy

My vote is in favor of using 5% increments

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Posted By: Marc S.

it is not that easy. Bill Clinton raised taxes during his tenure, and the economy in the late 1990s was stronger than any time in my meager 30+ year existence. It is never so simple as looking at economy and the tax rate....especially when you have things like spending, deficits, and myriad outside factors that also contribute.

Clinton raised the top marginal tax rate from 31% to 39.6%

Also, what taxes did JFK decrease? During his short tenure as president, the marginal tax rate in the highest levels was an astounding 91%

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Posted By: barrysloate

Scott- at what level do you think they should kick in? Even for a card that starts at $100, or at a higher threshhold?

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Posted By: Ted Zanidakis

MARC

Kennedy lowered that 91% rate to 70% and I think he lowered the taxes for the middle class, it was 45 years ago;
and, I don't recall all the details.

Clinton not only raised taxes (as you said) 31% to near 40%....he really hurt the retirees by raising their Social Se-
curity (SS) taxable amount to 85% in 1993.
For example....if you receive $12,000 in SS....85% of that is taxable, or approx. $10,000. Consider a retiree that is
in the 15% tax bracket....he or she have to give back to the government $1500 of their SS when they file their in-
come tax returns every year. And, mind you they had initially paid taxes on this SS.
This is blatant DOUBLE-TAXATION ! !

Clinton was lucky that he was in during a huge technology boom in this country, the economy thrived, irregardless
of his raising taxes. But, have you forgotten that a large component of that "economy" was based on the Dot.Com
"boom" whose bubble burst by 2000-2001.

I travel to Europe occasionally, the economy of most of those countries is suffering due to their high taxes and their
socialistic governments.

But, if you like higher taxes, don't let me dissuade you. But, you are in a minority in this country.

TED Z

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Posted By: Ted Zanidakis

For example....currently on Huggins & Scott there is a lot I'm interested in that started at $400.- and has 7 bids.
It is at $650......with 10% bidding it would be at $800. You, can multiply these numbers by whatever factor you
choose to extrapolate any other bid comparisons.
The point I am making here is that, although I have been outbid, I still feel like I'm in the "ballgame"....and, I will
bid again.
If this lot was at $800, I'd think twice.

TED Z

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Posted By: Joann

Barry,

Maybe the place to start with smaller increments is the point at which the potential loss of the next bid becomes important to the seller. I've never consigned so I don't know, really. And of course, all money is important to the seller.

But I'm thinking that if a card is worth (to the people bidding in that auction which is the market for that card) $125, and the bidding is sitting at $120 with the next bid at $132 it will stop there and the seller has lost $5. He probably won't mind.

But at some point he might mind? Maybe a card is "worth" $1675 and currently sits at $1600, with next bid at $1760. Here, it's more likely to stay at $1600 and the seller is out $75 so maybe he does mind a little more. With a 5% increment the next available bid would be $1680 and he'd probably get it.

So where to start? Maybe where the 5% next bid would be about $50 or so? So at $1000? Then instead of the jump being $100 and the seller potentially losing out on $50 or so, the $1050 bid would be available.

Obviously this is all very individual. To me I think leaving $50 or so on the table would start to irritate. Ohter's would probably not even notice.

Joann

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Posted By: Matt

I think our discussion is misguided - what's the downside in allowing 5% or 3% bid increments from the get go? The only issue voiced is that at the end of the auction, with the 15 or 30 minute extension, the auctions will go on longer. That, seems like an issue with that extension period being too long as opposed to the bid increment being too small. Making the extension period 5 or 10 minutes seems to be the appropriate solution. Using larger bid increments to keep people from bidding at the end of the auction doesn't seem to be in anyone's best interests.

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Posted By: Scott Mt. Joy

It would probably start affecting my bidding around $500 but I dont see any real downside in just making the whole thing at 5%(plus a lot easier to program). As has been mentioned above I think more bidding leads to more competition (within reason of course), which imo makes a better auction.

Barry, I think you have a real advantage vs the larger auction houses in that you can try something like this out and then based on how the auction goes make a judgement on future auctions. IMO you are showing your willingness to put your customers ideas to the test which is a big plus and affects where I decide to spend my future collecting dollars.

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Posted By: barrysloate

Joann and Matt- all good points, and part of the decision may simply be how the software is designed. If I can start the 5% at any level I want, I'm thinking $500-1000 would make most sense. At $200, for example, I don't think it matters whether you have to go $10 or $20 higher. Hopefully, anyone participating in the auction has an extra $10 to spend.

Of course, this could go both ways. Someone might bid $5000 on a lot and be done. With the next bid at $5500, that might scare away all other bidders. But with a chance to bid $5250, someone might get in that last bid. So it is entirely unclear whether smaller increments hurt or help the bidder. I guess if you are high bidder and at your max it will be a disadvantage; but if someone else is high and you wish to top that bid, it will help.

But I completely agree the smaller increments will be met favorably, so I plan to make some change for my January auction. Thanks to all, and feel free to add more feedback.

And I commend myself for staying out of the Clinton/taxes debate. I'm learning to exhibit self control.

Edited to add Scott was posting when I was, and I thank you for the support.

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Posted By: Ted Zanidakis

Gee, for two years I have posted my complaints on this Forum regarding 10% bidding increments. And, it is looking like Net54ers
are starting to pay attention.

Barry....kudos to you if you adopt 5% increments in your next auction. Prior to giving this a try, consider talking with Bill Huggins,
to get his opinion on the pros and cons....since his auctions are based on less than 10% bidding.

TED Z

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Posted By: barrysloate

Ted- I agree it's a good idea but I just want to figure the point at which the 5% should kick in. I don't think it makes sense for a lot that's at $200, but at some point it does. So that's what I'm kicking around.

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Posted By: Matt

Barry - what's the harm at doing it the whole way through? Whoever is programming the auction software will thank you for that decision.

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Posted By: leon

I think I agree with Matt on this one. Why not make the whole auction go up at 5% increments? Even if you start a lot at $100 and only go up in 5% increments it's not that big of a deal. Also, some folks might think they will pay $180 and not $200 for a card so you could potentially realize a few extra bucks. As for bidding more....the exercise of tapping an "enter" key on our keyboards, or a click with our mouse, really isn't that much work. I have become pretty good at it. Just something to think about..I haven't thought about any downside to it yet.... Now if I can only figure out how to lose weight and make it more of an exercise while doing it I will be much happier....regards

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Posted By: JimCrandell

I would urge all auction houses to stay at 10% all the way up. Not a big deal--

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Posted By: boxingcardman

It gets tough on us non-math types figuring percentages on percentages of the base bid. H&S's straight numbers are a lot easier to work with. And I am definitely less likely to make that next bid when it takes a full 10% plus BP to do it.

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Posted By: Matt

Jim - why?

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Posted By: Ted Zanidakis

You are one of the few "kill-joys" on this topic....but, then I'm not surprised since 10% (or higher) bidding increments
only serve to drive realized prices, in recent auctions, higher than their actual card values.

TED Z

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Posted By: JimCrandell

Matt,

Easy--Because most people think like Boxingcardman--as he says many people less likely to make that next bid if it takes 10% to do it.

Also since I do not trust many auction houses to run me up to the top alls it means more frequent calls which is a pain in the neck.

Jim

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Posted By: Matt

I'm pretty sure boxingcardman was using that as logic to NOT have 10% increments - how is discouraging the next bid a reason FOR having 10% increments?