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How to Maximize Bidding Activity on eBay Auction Listings

In this article, Mathew Leach discusses the psychology behind eBay auction bidding. The common practice in first price auction as we went over in class would be to bid the value you think the item is worth. Thus, if you win, you get the item for the price you value it at without overpaying; and if you lose, you also win since you wouldn’t have wanted to pay more than what you thought the item was valued at just to get it. However, eBay bidding is much messier, and bidders often diverge from this theoretical dominant strategy.

One reason behind this as Leach points out is people like to “win” and they don’t want to lose an item that they have already invested time in to win. These “non-ideal” bidders don’t bid with a maximum price in mind and the more they bid, the more invested they are. As the bids slowly increase, bidders are prone to bidding higher and can justify this thought because the price often moves up only in small increments. Also, as bidders bid more, they start investing time into the item and want it more thereby causing a positive feedback. However, with this mindset, they can easily get trapped in a bid contest where they end up paying too much, and thus get buyers remorse even afterwards. Thus due to human nature, they avert from the proven dominant theory in first price auction and may end up not getting the item for the price they had initially planned prior to bidding. While there is a dominant strategy in ascending bid auctions in theory, it is not often used in practice and auctioneers can use this to their advantage in driving up prices.

 

http://www.terapeak.com/blog/2013/12/06/terapeak-how-to-maximize-bidding-activity-on-ebay-auction-listings/

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