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TV Auctions Are Making It Harder For Real Bidders

http://bottomline.nbcnews.com/_news/2012/10/03/14171375-storage-auction-shows-ruining-it-for-the-rest-of-us

 

Buyers who used to be “regulars” at auctions are beginning to shy away because they can’t compete with the attention being brought by tv auction shows such as Storage Wars. Items that would generally have low values are being purchased by these tv bidders who have more capital and access to storage for longer term investments. When the valuations of these items gets inflated, it is necessary to store them until another bidder comes around who is willing to pay more for it than you paid. However, since storage isn’t free, this cuts into the profit margins for bidders and makes life harder for everyone.

 

Auction shows on tv tend to inaccurately portray what auctions are really like and create a sense that making money at auctions is very easy. In fact, these same shows are making it harder on everyone. As we know from class, there is rarely a time when you should bid below or above your valuation of an item. In order to profitably make bids that do not match up with your valuations, you need to know a lot about your rivals’ valuations. Since that knowledge is almost never available, many bidders are making the decision to not bid at all and are removing themselves from the auction scene. This is exactly what we would expect to happen based on what we have learned in this course.

 

The example used in the article involves newspapers with headlines about Elvis’ death. These papers would generally be inexpensive because hundreds of thousands of them were printed and, as far as we know, are still pretty common. However, tv bidders will often come along and pay a premium price for items like this knowing they can make up for it in the long run. Even though they can’t make a quick turn around, they can slowly sell these newspapers over a long period of time and make their money back. A lot of bidders either don’t have the time or the money for a long term investment like this and therefore get edged out of the auction. These “regular” bidders are finding it harder to make a living every day as a result of the tv auction shows.

 

-Derek

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