Auctioneers always want a big crowd — the number of people standing there and/or the number of bidders registered online. Generally, bid crowds translate to more proceeds for our sellers. However, auctioneers not only need (and want) a large number of bidders but the right bidders.
It doesn’t matter if you have millions of bidders if you don’t have the right bidders, but the more bidders you have, the more chance the right bidders are there. Some say as long as you have the right bidders, crowd size doesn’t matter.
However, we believe both: With more bidders participating, the more chance of the right bidders and the larger the bidder pool (crowd,) and the more those bidders will bid. We’ve calculated the chances of having the absolute highest bidder (alpha) and the absolute second highest bidder (beta) based upon the number of bidders.
As can be seen here, with only 6 bidders, there is about a 50% chance to have alpha and beta bidding and with 14 bidders, those odds move up to about 75%: https://mikebrandlyauctioneer.wordpress.com/2019/04/22/auctions-and-the-chances-of-alpha-and-beta-etc/.
But, big crowds do help. If alpha and beta are there — all alone — they will bid but if they are surrounded by other bidders they will likely bid more. We wrote about the environment at any auction (particularly live) and the collaborative nature of bidding: https://mikebrandlyauctioneer.wordpress.com/2016/05/31/large-auction-crowds-busy-restaurants-and-relevance/.
It’s also worth mentioning here that two Nobel Prize winners (Paul Milgrom and Robert Wilson) concluded that with more disclosure, the more your bidder pool will bid. This can be accomplished in two ways: Disclosing all material facts about the property you are selling and allowing for the opportunity to preview. https://mikebrandlyauctioneer.wordpress.com/2020/10/16/providing-as-much-information-as-possible/
Given it has been established that more disclosure results in higher bids, we would conclude doing any less a breach of fiduciary duty. Relatedly, how would you argue that your policy of less disclosure and/or denying reasonable opportunity to preview is helping your seller? You as an auctioneer work for your seller, remember?
Auctioneers have been told for the last several years (at least) that you “can do” a variety of things with little regard to proper procedures. We continue to suggest that just because you can doesn’t mean you should. Careful listing to “you can” (and those related memes) and ask yourself if “you should?” https://mikebrandlyauctioneer.wordpress.com/2020/08/17/you-can-so-you-should/.
Some argue that “must” is how you choose to behave, and “should” is how others want you to behave. I don’t have a strong counterargument to that theory, and of course, auctioneers don’t work alone, and rather are in agency and other relationships with sellers, consignees, other auctioneers, and the like. It matters how those related entities want you to behave.
What should you do as an auctioneer? (1) Endeavor to have alpha and beta at your auction for every lot. (2) Strive to maximize the bidder pool (the total number of registered bidders) — without marketing costs exceeding benefits — in order to help alpha, beta and everyone else feel better about bidding and their purchases. If you have some other plan, auctioneering may not be your best choice of a profession.
Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, RES Auction Services, and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, and an Instructor at the National Auctioneers Association’s Designation Academy and Western College of Auctioneering. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.
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