Tonight we had an auction for a local gentleman that was moving to assisted living. The auction featured his collection of shop tools, lawn equipment, and truck. In addition to his personal property, we sold his 3-bedroom, 2-bath home on the auction. An interesting thing happened during the auction.
As I was selling, we came upon two air compressors. One was a very nice, nearly new, Campbell Hausfeld compressor. The other compressor was an older, very used, tank compressor. I offered choice of the two compressors despite their obvious differences. The Campbell Hausfeld sold for a respectable $150. I offered the second compressor to the back-up bidder much to the chuckle of the crowd. However, the chuckling quickly turned to buzz when I sold the compressor for $80 to the back-up bidder.
Later, I relayed the events to the seller. He got quite the chuckle out of the situation. You see, he had two garage sales in the past, and had tried to sell the older compressor for $20 each time. Needless to say, there were no takers.
This is just one more anecdote in the long line of why auctions work. Auctions create urgency, and force buyers to make decisions based on emotion and impulse. They also allow buyers to purchase based on perceived value. One person’s perceived value of an item is almost always different from that of another person. Finally, buyers are psychologically reinforced by other bidders. While there was a buyer for the compressor at $80, there was also a buyer for the compressor at $75. The successful bidder can rest assured they only bid one increment more than another person. Thus a successful buyer is positively reinforced by those he was competing against.
2 comments
Joe Petsick
May 16, 2008 at 11:07 pm (UTC -6)
To expand on your last point, a transaction occurs that rarely causes buyer's remorse, which most everyone suffers to varying degrees during a retail transaction. The seller (auctioneer) enters into the arrangement believing they can create a market and get perhaps an appraised price, or even better. The buyer (bidder) enters into the arrangement believing he/she is in control of the price they are willing to pay. Once the transaction is complete, both parties walk away without remorse, as they each believe they "won."
John D Schultz
May 19, 2008 at 9:37 am (UTC -6)
Joe, I couldn't agree more! Auctions truly are the "best" method for buyers and sellers to meet in the middle. The buyer doesn't pay more than what another buyer is willing to pay, and a seller is assured of a price that was competitively achieved in an open market.