2 Auctions – Update on Tactics
I mentioned in my last blog that I attended 2 local auctions on the weekend of 15-16 February 2020. In this blog I just wanted to mention a few things about auction tactics in the light of what I saw at these auctions.
In both auctions there was a bidder who adopted an almost identical tactic. When each auction got to the stage where the auctioneer was prepared to accept bids of $500, each of these bidders met every bid with a bid of $500. In the case of the 2nd auction, the bidder placed his $500 bids almost before the bid he was responding to had been made. He made at least 10 or so of these bids, and made them whether he was responding to knockout bids or bids of $500. He gave the impression that he was intent on winning the auction by topping any other bid that was made by the minimum bid amount, regardless of how many other bids were made. Unfortunately for him, however, when he hit what must have been his limit, there were still a couple of other bidders who were still going.
In the case of the 1st auction, the constant $500 bidder won the auction, although he had made his bids in a much more sporadic fashion.
A few observations
Higher limits beat tactics every time
Auction tactics are not the be all and end all of auctions – as the 2nd auction shows, even though the $500 bidder executed his tactics perfectly, he did not manage to psych out at least 2 other bidders. Those 2 bidders did not seem to be following any pre-conceived bidding plan – in fact they were all over the place in how they placed their bids.
The winning bidder won because she kept bidding until she was the last bidder, regardless of what anyone else did. She won because the limit she had set for herself trumped the limits set by all the other bidders, and because she bid to that limit (or at least until all of the other bidders had reached their limits). As I say in my book, winning auctions is not rocket science.
This also highlights another thing that I say in my book: the single most important thing in an auction is the amount of your limit. That is why you should pay very close attention to the factors that I discuss at length in Chapter 6 of my book in working out what that limit should be.
Readers of my book will be aware that I do not have a high opinion of knock-out bids. (Reminder: A knock out bid is a bid for a rise that is considerably higher than the rise that was bid immediately before the knock out bid was made.) In both auctions bidders attempted knock out bids at various points. In doing that they were very much encouraged by the auctioneer in each case. Neither auction was won by a knock-out bid. Both auctions were won on a rise of $500. My opinion concerning knock-out bids remains unchanged.
At least the knock-out bids helped to move both auctions along a bit faster.
In both auctions it was clear that several bidders attempted the come-in-at-the-end approach to bidding. This is not an approach that I recommend in my book.
In both cases those bidders were forced to place a number of bids, and in neither auction was such a bidder the winning bidder. In both cases the winning bidder came into the auction fairly early.
So, in summary, although ultimately there was not much of interest to report in terms of tactics from the 2 auctions I attended, it is good to get confirmation every once in a while that the earth is still turning in the way most of us expect it to turn.