This week in class we continued to learn about auctions. We had class discussion and the finial class. The final class was interrupted by Second Life shutting down for repairs, at which point I played “The Finial Countdown” in class. At which point people started making jokes about the end of the world and someone played “It is The End of The World and I Feel Fine”. It was a fun last class and this will be by last blog for this class.
The topic that I will do for this blog is “silent” auctions. I did this topic last week, but I did not do very much on how the people running the auction try to maximize the revenues that they bring in. I hope to expand on this topic during this post.
The people running the auction often have incentives to maximize profits for the auctions and will take actions in order to increase the amount of money brought in. They will use anything from advanced strategies well know processes to old tricks. Though the methods vary, they are all effective in increase the revenue brought in by the “silent” auction.
One strategy used to increase the amount people will bid on items is to provide “unlimited” amount of alcohol at the event. This acts to increase people’s willingness to be at the event. But, more importantly for the profits of the auction, alcohol tends to decrease people’s ability to make good judgments. This makes it so people are more likely to engage in higher bidding, bidding, and wars, not calculate correctly what an item is worth them, and be easier to manipulation by the people running the auction. All of these effects of alcohol will increase the profit potential of the auction. This takes advantage of the very old understanding that alcohol reduces people’s ability to engage in “rational” thought and make “good” decisions.
The auction runners also seem to have a preference towards “hard” liquor. There are economic reasons for this drink choice on the part of the people running the auction. “Hard” liquor has the advantage of causing people to get more impaired quicker than other types of alcohol. This could cause people to start bidding on items faster and bid high faster than they might with no alcohol or other types of alcohol. Also, it is harder for people to know how much alcohol they have consumed with “hard” liquor, people who might want to drink in moderation might not be able to tell if they are consuming more than they had planned. One other consideration is that “hard” liquor does not make people have to use restrooms as often. This is a good trait for an auction, given that it keeps people bidding and not going someplace other than a bidding table.
Some of the “silent” auctions that I have been to have had the auction in the only place that was heated/cooled. This does encourage people to be in the auction area. This makes it much more likely that people will be in the auction area. This makes it much more likely that people will bid on items and bid higher.
The people running the auction will in some cases put a price on what the items are worth outside the auction. They will do this with some items but not on other items. The reason for this is to increase the price paid for items that are at the sale that the people running the auction think would not be bid up so high without the “information” about how much an item is worth. This is not done on items that the people running the auction think will end the auction with a price above the prices that the market has set outside the auction. The “information” on the outside price is usually provided for items that have a high price such as vacation houses, expensive equipment, and unusually items that have an outside price that many at the auction will not know about.
Another strategy used by the people running the auction is to bid up the price of the items during the auction. The reason for doing this is simple, to increase the price that is paid for the items. It does seem to work in that it seems to increase the price that people pay of items.
The time left in the auction is often announced during the auction but not really all that accurate. This keeps people bidding thinking that the end of the auction is closer then it is. The auction does not ever seem to end at the stated time. Instead it seems to end when all of the major bidding wars have ended. This is a very good stagey on the part of the people running the auction. This increases the amount that people pay for items, maximizing the revenue that can be obtained.
It is also a good way to reduce sniping. It is hard to snip when the end of the auction is not known to the person sniping. Having the end not is determent in advance makes it hard to snip and encourages people to bid the maximum about that they would be willing to pay. This “soft close” makes it so that sniping is harder to do and tends to not produce such a low price as it would in a “hard close” auction.
In conclusion, the people running the “silent” auction take actions to increase the amount of revenue that the auction brings it. Thought the auctions are often for a charity or a non-profit the people running it often have incentives, if non-monetary, to increase the amount of money brought in by the auction. The strategy used to increases the revenue received by the auction vary in both effectiveness and how complex they are. But from what I can see all of the strategies I have dealt with in this blog do seem to work. They all increase the amount of money brought into the auction. So this would point to the idea that the people running the auctions are effective in increase the amount of money brought in by the “silent” auction.