Auctions can be compared to gambling in so many different ways. Most people just point out that there’s no guarantees on how much your item will sell for, therefore you’re taking a gamble by auctioning it. That’s the easy one. But I think there’s some psychological proof to this claim as well. I have a lot of experience with gambling, and game theory, cause for a while I did it for a living. And when you gamble for a living, you start to pick up on little things players do unconsciously to increase the rush. Take a simple game like 5 card draw for example. There’s this standard tell that people still do to this day. When drawing to a flush, they will shuffle up their cards and then fan them out very slowly to see if they nailed their missing suit. Now the actual tell comes when they’re fanning them out, if you see them pause slightly before all the cards are fanned out, and then not look at the rest of the cards, you can be sure they didn’t get their flush. But the question is why do they shuffle and fan them out in the first place? It’s the rush they’re looking for. They don’t want to know what’s coming. They want to be surprised. So how does this compare to auctioning? Well when you have 20 or 30 related auctions to list, and you know what the most valuable item is, when do you list that item, first, random, or last? You list it last. You always list it last. And you do this because you want that excitement, of auctioning the most valuable item, to last as long as possible. You never hear people discussing this terrible practice, so I thought I’d tackle it here and give my reasons why listing the most valuable item first, is the most logical approach to getting the most for your items.
Let’s talk in terms of collectables, because this is the area that I understand the most, and therefore should give me the most ammo to prove my point. If you’re a collector, and you’re going to auction off say 30 items you don’t want anymore, one would assume these items are somewhat related. And since they’re somewhat related, each item will probably attract the interest of related people. Which also means bidders watching your auctions will probably have interest in more than one item. These related bidders can be broken up into 3 distinct categories as it pertains to their budget: Bidders with a large budget, bidders with a set budget, and bidders with little to no budget. The bulk of the people in this world are bidders with a set budget. Now let’s combine these two conclusions. We know that bidders will be attracted to multiple items you’ve listed, and we also know that most of these bidders will be working with a set budget. With this in mind, let’s discuss a few theories I have about the order in which you should list your auctions.
When the most desirable item is listed last, in a group of items that are related, some bidders gunning for that item have a tendency to protect their budget. Meaning they usually don’t get too heavily involved with auctions prior to the big item because they want to make sure they have the funds available for the big item. I call this “Nest Egging”, and it’s very bad for sellers. If for example 6 people are in the market for that top item, and they’re Nest Egging their funds, then the seller’s other auctions don’t have access to these funds. And by the time these funds are free, there’s no auctions left to bid on. So in this case, listing the biggest item first allows all the heavy hitters to bid on this item, and when that item is over, all the funds that would have been held till the end of all your auctions, are now free to be spent on other items.
If Nest Egging is the act of saving your funds till the end, then there should be a term for getting all hot over an early auction and blowing your wad. Well I don’t have one for this, but I bet a very creative person could come up with something using the word “Premature”. Never the less, this error in judgement or blip in someone’s self control, can really hurt future auctions. Most people who follow auctions know the logic that it only takes 2 people for an auction to explode. No matter what that item is actually worth, if 2 people bid an amount well above the item’s value, someone is going to get hurt. And the more carrots you dangle out there for someone to get hurt on, the more of a chance you’re taking that you will in fact be the person hurting.
I believe these two theories prove that, when dealing with people that have a set budget, listing the most valuable item first is the proper course of action. It also proves that it doesn’t matter if this bidder with a set budget, has a lot of self control, or very little self control. The most valuable auction first is the way to go.
Burning a Hole
What about the other two types of budgets? Let’s start with the bidder with more money than they know what to do with. Well in this case, I don’t believe the order matters too much. This person has the money to bid on all the auctions, so the placement of the most valuable auction doesn’t matter too much. There is an argument that you’re essentially taking the heavy hitter out of the game by putting that valuable auction first. The point is that since you’re putting the valuable first, you’re increasing it’s end of auction value, and there by nullifying the bid of the high budgeted bidder. This is a good point. The argument against this is, the bidder with the high budget now has all the money he thought he was going to spend on the valuable auction at the ready. This bidder thought he was going to win that auction. He is the big player isn’t he? So in the bidder’s mind, that money should have been spent already. This might make him bid more than he would normally bid on the lesser valued items, so he doesn’t walk away with nothing.
Poor Man’s Prayer
The final type of budget is a bidder with little to no budget at all. This type of bidder doesn’t usually affect an auction that has a lot of bids, they affect an auction with no bids. Meaning since this bidder doesn’t have much money, he’ll put a lot of very small bids out on items that not only don’t have bids, but also may not even be an auction he wants that bad. So he’ll put a whole bunch of 2 dollar bids out on .99 starting priced items, just hoping he can score an item on the cheap. Well if we all agree that listing the big items first helps out the other auctions, cause it frees up funds, than essentially what it really does is save items from getting picked off by these cheapo 2 dollar bidders. So bidders with no budget don’t help sellers by increasing the bid, they actually hurt sellers by stealing items that are overlooked or just cold at the moment. And anything you can do to prevent these bottom feeders from getting off easy, the better.
So that’s my theory. List the big items first. And if you know the second biggest item, list that one second. Just go down the line of greatest to least. I believe it frees up cash and allows the bidders with some money, to not worry about their budget when some of the smaller items come their way.