We have held for decades that lower (or -0-) starting bids result in higher final bids — such as absolute auctions or with reserve auctions with academic published reserves. For example, “Sells to the highest bidder regardless” or “Our $500,000 property here has an opening reserve bid of $240,000 …”
Additionally, we have proposed that the “food tastes better in a busy restaurant” in that bidders bid more when there are more other bidders engaged. Our 2016 treatise: https://mikebrandlyauctioneer.wordpress.com/2016/05/31/large-auction-crowds-busy-restaurants-and-relevance/.
This research is supported by analysis and conclusions published in 2007 by the Kellogg School of Management at Northwestern University (Professors Adam D. Galinsky and J. Keith Murnighan.)
We encourage you to read the entire article (links below.) As you will see, here are two highlighted conclusions from that research:
When the researchers compared two different starting prices—$9.99 and $24.99—they found that the more time bidders sank into the auction ($9.99 versus $24.99) the greater the final selling price. https://insight.kellogg.northwestern.edu/article/place_your_bids
Economically you want to avoid high-traffic auctions, but psychologically you are lured by high traffic.” — Professor Adam Galinsky https://insight.kellogg.northwestern.edu/article/place_your_bids
If by chance, the above links are inoperable, here is a copy of this research publication titled “Place Your Bids, Strategies for selling and buying at auctions.”
If we were to summarize, there are two auction take-homes here: (1) the lower you start, the higher the final bid price. (2) the more bidders registered, bidding, and/or engaged, the higher the final bid price. Auctioneers should do everything they can to start low and as such maximize the “crowd” to help their seller.
Finally, this research would tend to (if not positively) support our contention that bidders respond to the “prospect of a deal” which is that -0- or low starting bid which then results in more bidders, and higher prices for the seller: https://mikebrandlyauctioneer.wordpress.com/2009/12/11/auctions-and-an-iowa-corn-field/.
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, Brandly Real Estate & Auction, and formerly at 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 Auction Association’s Designation Academy and Western College of Auctioneering. He has served as 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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