I'm currently running an auction in REFRACTORS and am encountering some interesting questions from people who perhaps have not thought through "the theory of auctions" and also how it relates to classified advertising. In particular I'm going to talk about the opening bid price, the reserve price, and the buy it now price.
The opening bid price is designed to keep people in the right market for them. In my particular auction, if one wants a $30 finder, an auction for a Stellarvue F80 is probably the wrong place to begin (though hope springs eternal, I know). People who are in the market for an inexpensive Corolla to be sold at auction for $10 to $12k shouldn't really be bidding for a slightly used $300k Lamborghini which happens to be on the same lot. The opening bid limit encourages people to stay in the market for which they have the right funds and expectations.
One sets the opening bid price below one's reserve price to get a sense of the "spread" of interested buyers below the price at which one is willing to part with the item. This is useful to know if the auction fails.
The "buy it now" price may represent one's best guess as to actual value or one's most optimistic hope. Personally I think too high a buy it now price turns off potential bidders and makes them think that the reserve is higher than it may in fact be. I'm not sure why one would use the "buy it now" price since one can run a classified at that price and sell. When you get two dozen queries on an a classified you know you probably have priced too low but by then you've sold it and made a mental note that next time--why not try AUCTIONS? With a classified, the ideal pricing strategy is to get three or four motivated queries from people at the top of the price range (from the seller's point of view: the risk to buyers is that by waiting for the classified advertiser to list at a lower price, they lose the item to someone else). I had a rather stunning experience selling a Tak focuser a couple of years ago which went for double what I thought it was worth: but I think I was not taking into account how "cheap" dollar products looked at that time (in Europe). Anyhow I tend to look at the value of things in terms of next-available-substitutes and sometimes this gives a very different pricing result than one would think, because one's bidders in fact have tried the next-available and they don't like it, which is why they are bidding on your item. Or any number of other hypotheses....often times, neither you, nor they, have in fact arrived at a definitive valuation.
If the auction fails to sell the product one has the option of contacting bidders if one adjusts one expectations, or one might take note of the spread and place a classified "to see how it works that way." An auction that is listed for a week has less time to attract motivated buyers than a classified which lists for three weeks and catches more drop-in views. This is where the calculated risk comes in. The seller hopes that the item will eventually sell for more than the reserve, perhaps even more than one would list at in a classified. One can't be sure. The buyers have their say in this game too.
In any case one does not *share* the reserve price because that is a bit like a classified ad where one says "price $100 but I'll take $80." If you SAY that, then you will get $80.
Astronomy is a thinly traded market in many items. Markets can be thin on fairly inexpensive items (like the Stellarvue F80) and also on the pricey ones. It may be that someone out there is willing to pay $50,000 for a 10" AP Mak Newt, but that does not mean that there are *a lot of buyers* at that price. Some people might stop to consider that at that price they could get a 20" RCOS and keep a spare in the closet. We tend to think of "the value of the good" on the basis of "the last price paid." That's the way it works in the housing market. Or the stock market. But in a thinly traded market--which astronomy is--there may be one person willing to pay $50k and then a steep slope down to the next willing buyer at $20k. In thinly traded markets the low volume does not give reliable pricing because buyers are few and all over the place. The buyers are *also* unsure of the "market price" of the item.
When an auction is most favorable to the seller it is because the most highly motivated buyers are aware of and have been attracted to the auction. If they are absent the bidding will be less aggressive and the seller may not meet his minimum goal. So he thinks....hmmm, below this price, maybe I can find another use for this thing so I'll not sell it, or perhaps, I'll sell it in a different way. So the reserve is a bit of a safety net for the seller.
To conclude:
Dear bidders--
1. I am not interested in secretly disclosing my minimum (reserve) price!!!
2. The opening price is just "to get the game going" it is not the price at which I or most other people will in fact sell
3. An auction which fails to meet reserve price still discloses useful information to sellers and buyers
4. I must say that of the several dozen sales and purchases I have made on astromart, the most fun have been the two or three auctions.
Astromart auctions prohibit sniping (it is fascinating to me how many variations there are on auction design). Sniping is when you come in at the last minute to put in high bid and take the item from the people who have been plodding along. Astromart resets an additional five minutes after a very late bid to prevent this. Alternatively, ebay tolerates it: there are services which will snipe a bid in during the final six seconds of an auction.
Many people think this is unfair, but I am not so sure. Once one has been in the game a while there are certain names that attract attention. There are people here on AM, who, if they were bidding on something, might make me look at it real hard to see why they saw value where I did not.
So well known volume buyers can "attract price competition" which works against their own interest. This is why there are insider trading rules. And also why everyone wants to know what Warren Buffett is buying. Some people have a reputation for choosing well, so if word gets out that Mr. Buffett is picking up 100k shares of something that will make it attractive to others, who will assume he knows something they don't. And they trust Mr. Buffett's judgment more than their own (perhaps rightly so).
I have sniped (on that other site), I have been sniped, and I have been out-sniped (dueling bids in the last six seconds go to highest bidder of the two: but snipers will automatically lose to someone who simply has entered a higher maximum bid, even though he has not sniped). I have also listed here where the practice is seen as unfair. Works for me. There are thousands of different auction designs, this one works pretty well I think.
Auctions are a great deal of fun, but classifieds also have their place, and are the bread-and-butter technique for most of us, for buying and for selling.
And I hope you all forgive me for simply following the rules of the system here "as I have found it." I'm being mean spirited, I'm just letting the auction run its course as it was designed to run here. I'm sorry to say that one person got very angry when I refused to divulge the reserve price "off line." One can read more about auction designs here:
http://en.wikipedia.org/wiki/Auction
best wishes,
Greg N
The opening bid price is designed to keep people in the right market for them. In my particular auction, if one wants a $30 finder, an auction for a Stellarvue F80 is probably the wrong place to begin (though hope springs eternal, I know). People who are in the market for an inexpensive Corolla to be sold at auction for $10 to $12k shouldn't really be bidding for a slightly used $300k Lamborghini which happens to be on the same lot. The opening bid limit encourages people to stay in the market for which they have the right funds and expectations.
One sets the opening bid price below one's reserve price to get a sense of the "spread" of interested buyers below the price at which one is willing to part with the item. This is useful to know if the auction fails.
The "buy it now" price may represent one's best guess as to actual value or one's most optimistic hope. Personally I think too high a buy it now price turns off potential bidders and makes them think that the reserve is higher than it may in fact be. I'm not sure why one would use the "buy it now" price since one can run a classified at that price and sell. When you get two dozen queries on an a classified you know you probably have priced too low but by then you've sold it and made a mental note that next time--why not try AUCTIONS? With a classified, the ideal pricing strategy is to get three or four motivated queries from people at the top of the price range (from the seller's point of view: the risk to buyers is that by waiting for the classified advertiser to list at a lower price, they lose the item to someone else). I had a rather stunning experience selling a Tak focuser a couple of years ago which went for double what I thought it was worth: but I think I was not taking into account how "cheap" dollar products looked at that time (in Europe). Anyhow I tend to look at the value of things in terms of next-available-substitutes and sometimes this gives a very different pricing result than one would think, because one's bidders in fact have tried the next-available and they don't like it, which is why they are bidding on your item. Or any number of other hypotheses....often times, neither you, nor they, have in fact arrived at a definitive valuation.
If the auction fails to sell the product one has the option of contacting bidders if one adjusts one expectations, or one might take note of the spread and place a classified "to see how it works that way." An auction that is listed for a week has less time to attract motivated buyers than a classified which lists for three weeks and catches more drop-in views. This is where the calculated risk comes in. The seller hopes that the item will eventually sell for more than the reserve, perhaps even more than one would list at in a classified. One can't be sure. The buyers have their say in this game too.
In any case one does not *share* the reserve price because that is a bit like a classified ad where one says "price $100 but I'll take $80." If you SAY that, then you will get $80.
Astronomy is a thinly traded market in many items. Markets can be thin on fairly inexpensive items (like the Stellarvue F80) and also on the pricey ones. It may be that someone out there is willing to pay $50,000 for a 10" AP Mak Newt, but that does not mean that there are *a lot of buyers* at that price. Some people might stop to consider that at that price they could get a 20" RCOS and keep a spare in the closet. We tend to think of "the value of the good" on the basis of "the last price paid." That's the way it works in the housing market. Or the stock market. But in a thinly traded market--which astronomy is--there may be one person willing to pay $50k and then a steep slope down to the next willing buyer at $20k. In thinly traded markets the low volume does not give reliable pricing because buyers are few and all over the place. The buyers are *also* unsure of the "market price" of the item.
When an auction is most favorable to the seller it is because the most highly motivated buyers are aware of and have been attracted to the auction. If they are absent the bidding will be less aggressive and the seller may not meet his minimum goal. So he thinks....hmmm, below this price, maybe I can find another use for this thing so I'll not sell it, or perhaps, I'll sell it in a different way. So the reserve is a bit of a safety net for the seller.
To conclude:
Dear bidders--
1. I am not interested in secretly disclosing my minimum (reserve) price!!!
2. The opening price is just "to get the game going" it is not the price at which I or most other people will in fact sell
3. An auction which fails to meet reserve price still discloses useful information to sellers and buyers
4. I must say that of the several dozen sales and purchases I have made on astromart, the most fun have been the two or three auctions.
Astromart auctions prohibit sniping (it is fascinating to me how many variations there are on auction design). Sniping is when you come in at the last minute to put in high bid and take the item from the people who have been plodding along. Astromart resets an additional five minutes after a very late bid to prevent this. Alternatively, ebay tolerates it: there are services which will snipe a bid in during the final six seconds of an auction.
Many people think this is unfair, but I am not so sure. Once one has been in the game a while there are certain names that attract attention. There are people here on AM, who, if they were bidding on something, might make me look at it real hard to see why they saw value where I did not.
So well known volume buyers can "attract price competition" which works against their own interest. This is why there are insider trading rules. And also why everyone wants to know what Warren Buffett is buying. Some people have a reputation for choosing well, so if word gets out that Mr. Buffett is picking up 100k shares of something that will make it attractive to others, who will assume he knows something they don't. And they trust Mr. Buffett's judgment more than their own (perhaps rightly so).
I have sniped (on that other site), I have been sniped, and I have been out-sniped (dueling bids in the last six seconds go to highest bidder of the two: but snipers will automatically lose to someone who simply has entered a higher maximum bid, even though he has not sniped). I have also listed here where the practice is seen as unfair. Works for me. There are thousands of different auction designs, this one works pretty well I think.
Auctions are a great deal of fun, but classifieds also have their place, and are the bread-and-butter technique for most of us, for buying and for selling.
And I hope you all forgive me for simply following the rules of the system here "as I have found it." I'm being mean spirited, I'm just letting the auction run its course as it was designed to run here. I'm sorry to say that one person got very angry when I refused to divulge the reserve price "off line." One can read more about auction designs here:
http://en.wikipedia.org/wiki/Auction
best wishes,
Greg N
"Scope will get you through times of no money better than money will get you through times of no scope." --Freewheelin' Franklin
