Auction Houses with Hidden Reserves

[Prof]

Originally Posted by Peter_Spaeth

It has always seemed to me that if a consignor only wants to sell at a certain minimum price, the simplest and most direct way to achieve that is to start the bidding there. But nobody ever seems to want to do that.

I assume it's a psychological ploy to start below the minimum price because it will entice people to believe that they can 'get a deal.'

That way, you get a handful of bidders who've put in a bid below the minimum, and now they're all emotionally invested in the item... which leads to bidding wars and a final price above the minimum.

Just starting at the minimum price will induce less action, and just have people going, "Yeah, that's market value. Not exciting/I can find that elsewhere."


I'm in favor of just starting bidding at the minimum acceptable price for the seller. Weed out some of the drama. But, people love drama.

[Peter_Spaeth]

Originally Posted by Prof

I assume it's a psychological ploy to start below the minimum price because it will entice people to believe that they can 'get a deal.'

That way, you get a handful of bidders who've put in a bid below the minimum, and now they're all emotionally invested in the item... which leads to bidding wars and a final price above the minimum.

Just starting at the minimum price will induce less action, and just have people going, "Yeah, that's market value. Not exciting/I can find that elsewhere."


I'm in favor of just starting bidding at the minimum acceptable price for the seller. Weed out some of the drama. But, people love drama.

No doubt you are right about the reasons for not doing it that way.