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.

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