Global Auction Blog

Are bidder’s attitudes different at traditional auctions versus fundraising auctions? Should a bidder’s attitude and approach be different for each type of auction? Yes! Fundraising and traditional auctions are two distinctly different types of venues, and the bidder is expected to demonstrate radically different attitudes in each setting.

Let’s face facts and the sobering reality that at traditional auctions the bidder wants to get the best deal. In traditional auctions sometimes the bidder gets the best deal, and the auctioneer is left to cry in his soup that evening. Sometimes it goes the other way, and the bidder experience’s throwing himself over the barrel because he masochistically overbid on an item. You can never really know in advance what the final result will be as every auction has various crowds, conditions, and unique items.

In traditional auctions the auctioneer tries to establish the item’s value by starting with a high dollar bid amount, and then he progressively drops the bid until a bidder jumps onto the bid. I believe that this auctioneer technique also reinforces the bidder’s attitude and zeal in trying to get the best deal. At the point where the auctioneer receives his first bid, he then advances the bid as fast as he can from there. Auction items may occasionally sell for bargain basement prices, and sometimes items sell for over retail.

On the other side of the spectrum there are fundraising auctions, which are typically utilized in support of charitable causes. The purpose of a fundraising auction is to raise as much money as possible for the cause the event supports. Fundraising auctions are not about creating the best deal attitude in bidders!

Can fundraising auctioneers influence bidder’s attitudes and the outcome of a benefit auction? Absolutely! We have all heard stories about fundraising auctions that tanked because the items sold below cost, or worse the auction results did not meet the client’s expectations. You can always gage an auctioneer’s experience level by observing how they conduct their fundraising auctions. What precautions can the fundraising auctioneer take?

First and foremost, and well before the fundraising event, the auctioneer should discuss Guest Development with his client. Getting the right people at the event is critical. This makes all the difference in the bidder’s attitude, or instilling a more appropriate attitude in the bidder which successfully promotes charitable giving at the event. The fundraising auctioneer should counsel his client to make Guest Development a priority in targeting the philanthropists in his community. Getting the medical doctor to attend the event makes more sense than inviting the fast food restaurant employee.

There are also many other important areas for the fundraising auctioneer to consider in creating the right bidder attitude. Procuring the right auction items is also extremely important. A bottle of 1961 Chateau Margaux will bring a lot more money at a fundraising auction versus a gift certificate to Mc Barfys! Get in the habit of making an opening announcement to set the tone of the evening. For example; There won’t be any bargains this evening, as I expect everyone to give from the bottom of their hearts!

Attitude is everything! Throwing caution to the wind, and believing that you do not influence your bidder’s attitudes is begging for a short-lived career. Instill the right bidder attitude for your auctions.

Tom DiNardo is co-owner of DiNardo & Lord Auctioneers of Anacortes, WA. Tom is an Auctioneer, Appraiser, and Writer.

To contact Tom, visit www.DiNardoandLordAuctioneers.com

(c) 2004 Tom DiNardo - All rights reserved.

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by: Steven Woodward

The Auction Primer Series is a group of articles to help further educate sellers about auctions; their history, strategies for use, and provide a comparison of various auction sites and types. In Part 1, we look at the more common type of auctions in use today.

William Vickrey, highly regarded as the founder of auction theory, was an economics professor at Columbia University when he published two papers outlining his views on auctions:

“Counterspeculation, Auctions, and Competitive Sealed Tenders”, 1961, Journal of Finance

“Auction and Bidding Games”, 1962, Recent Advances in Game Theory

In 1996 he received a Nobel Prize “for fundamental contributions to the economic theory of incentives under asymmetric information.” It’s important to understand that asymmetric information is an essential component of auctions, where potential buyers have varying levels of knowledge about the value of the item.

Although Vickrey considered his work on auctions as “one of my digressions into abstract economics, at best of minor significance in terms of human welfare”, to those of us who work with online auctions, much of what he outlined is useful to understanding our marketplace.

Vickrey identified 4 general types of auctions:

English

Dutch

First-price sealed bid

Second-price sealed bid

English Auctions

The most common type of auction is the English Auction, although it may also be known as an ascending price auction. In ascending price auctions each subsequent bid is higher than the previous one. This is the most popular type of auction for single items.

Although traditional ascending price auctions use a “soft close” format - where bidding continues until a final bid is placed, the majority of today’s on-line auction sites use the “hard close” format - also known as a ‘time interval” auction having a set time limit, regardless of ongoing bidding. It’s important to note that in a “soft close” format, bid snipping, that is bidding during the last few seconds or minutes on an item, is eliminated since the auction stays open as long as bids are being made.

In an attempt to minimize bid snipping and provide more of a “soft close” characteristic to their “hard close” auctions, eBay allows bidders to use “proxy bidding”. In proxy bidding, a bidder enters the highest price they are willing to pay for an item when they first bid. The bid begins at the lowest possible level and increases automatically only if their original lowest bid has been beaten. For more in-depth information on the “proxy bidding capability on eBay go here. http://pages.ebay.com/help/buy/proxy-bidding.html

Amazon.com currently offers a feature for their auctions called “Going, Going, Gone.” The Going, Going, Gone” feature extends the end of an auction for 10 minutes if a bid is placed effectively creating a “soft close”. For more information on the “Going, Going, Gone” feature on Amazon go here. http://www.amazon.com/exec/obidos/tg/browse/-/1161360/103-1666189-8415007#going-gone

From the buyers standpoint a “hard close” format is preferable since they may be able to make a final bid before others can react, possibly winning the auction at a lower price.

For sellers, a “soft close” format provides an opportunity to realize the maximum price for an item by removing the time restrictions for an auction. As long as bidders are bidding the auction remains open.

Dutch Auctions

As you may have guessed, the concept of the Dutch auction originates in the Netherlands. Unlike English auctions which utilize ascending price methods, Dutch auctions are descending price auctions and are commonly used when multiples of the same items are to be auctioned. In a Dutch auction the bidding starts at a relatively high price which is driven progressively downward by bids.

As an example of a Dutch auction let’s say you had 10 items you wanted to sell for $20 each.

Bidder A bids $18 for 6 items

Bidder B bids $17 for 5 items

The final result is:

Bidder A would receive 6 items for $17 each

Bidder B would receive 4 items for $17 each

Please note that most Dutch auctions allow bidders to refuse an order for a lesser number of items than what they bid on. A “soft” or “hard close” format may be used in Dutch auctions although the most common is the “hard close”.

First-price Sealed Bid Auctions

Sealed bid auctions differ from the English and Dutch in as much as the bids are not announced to other bidders. The individual bid is only know to the bidder and the seller. This type of auction may be either buyer-bid, where the highest bidder wins the item and pays the amount of their bid, or seller-bid, where the lowest bidder sells the item and is paid the amount of the bid. This form of auction is common for construction contracting, military procurement, foreign exchanges, and other types of goods.

Second-price Sealed Bid Auctions

Another common name for second-price sealed bid auctions is Vickrey auctions (named after William Vickrey) There is a slight variation to the first-price auction for Vickery auctions. In a buyer-bid auction the highest bidder buys the item and pays the amount of the second highest bid. Or in a seller-bid auction, the lowest bidder sells the item and is paid the amount of the second lowest bid.

The above descriptions provide a general overview of the most popular auction types in use today. Depending on the auction website these general categories may include a number of variations and options such as reserve pricing, open or closed venue, multiple items, fixed price and lot listings to mention a few. Before entering any particular type of auctions make sure you study and understand the rules for that specific type of auction, as the rules may vary from website to website.

About The Author

Copyright © Steven Woodward – All Rights Reserved

Steven Woodward is the owner, editor and publisher of the Auction Sellers Network (ASN); a web site for individuals and companies who are serious about utilizing the online auction marketplace for their business. In addition to topical articles, ASN provides an extensive resource center, news feeds and member forums. For more information, or to become a member, please visit us at http://www.AuctionSellersNetwork.com.

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