Auction Opening Bids

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Posted By: T206Collector

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.

Example for illustration purposes.

Joe would pay $10,000 for a T3 Cobb.

Jim would pay $8,000 for a T3 Cobb.

No one would pay more than Joe or Jim.

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)

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.