A New Type of Auction


The idea I have for a new type of auction has probably been thought of before, although I have not heard of anything like it. It is probably a bad idea that will not work. But then this page is part of the "money making ideas" section, and not part of the "guaranteed ways to make money section" (okay I haven't added that section to the site yet). It will perhaps trigger some better ideas, and as a prelude I will be looking at some types of auctions that you may not be familiar with.

The most typical auction is one where the auctioneer babbles on in some stylized way while bidders either call out their bids or raise paddles indicating what they're willing to pay, with the item going to whoever makes the highest bid. This seems like a decent way to run an auction, except for the nonsense gibberish coming from the auctioneer. Ah, yes, I will get an email or two for my opinion. But let me explain...

I choose not to participate in auctions where I don't know what is going on because the auctioneer feels the need to be "traditional" and talk too fast to be understood. I know that others feel the same way (many have told me so). I understand that this style is entertaining and may increase excitement, but I have a simple question: What if the person who would have paid the most for an item is not bidding because, like myself, he or she prefers to actually know what's happening? Doesn't that suggest that sometimes things are selling for less because potential bidders are chased away by this ridiculous style? Show me one study which demonstrates that speaking clearly and more slowly brings in lower prices and I'll withdraw my complaint (but I will still skip the auctions with the fast-talkers). Now there's an idea for a new type of auction--one where all is clear.

Have you seen an auction where the price starts really high and drops? I have, and I'll explain it as well as I can remember. They apparently do this for some flower auctions in Holland (I saw it in a documentary). This is for large wholesale batches of flowers, and there is a "clock" of sorts, with prices around the outside edge. The one hand on the device starts at a price that nobody is willing to pay, and then clicks around one step at a time, each time landing on a lower price.

The buyers watch, and when someone sees a price that makes sense for him, he stops the whole process and he has bought that bunch of flowers. Not as exciting as the usual type of auction, but it makes sense if you think about it for a moment. You only get one chance to buy those flowers, so you better pay as much as you are willing to pay or you will go home with nothing. It may even generate higher bids than a typical auction would. Consider that in a normal auction, if an item is worth $15,000 to you but the bidding only goes to $11,000, that's what you pay. But in this type, you better pay the $15,000 when the clock hand gets there, or you may watch someone else buy that item and have no second chance.

Sealed bids are another way to auction things, and they share one thing in common with the "countdown clock" method. They motivate you to bid the most you are willing to pay, because you don't get a second chance. You know that if you really want a car at $4,000, for example, you better not bid $3,000, because it might then go for $3,100 and you don't get to later say, "wait. I'll pay $3,200!"

My New Type of Auction

Okay, here it is, and the more I think about it, the more it seem appropriate to auctioning something off to raise money for a charity. In any other context the bidders might get too upset.

The basic idea is that each bid is kept by the seller. So if, for example, our charity is auctioning off a new television worth $600, I might start out by bidding a dollar. To do so I actually pay them that dollar, and they keep it no matter what. Someone else can bid $10 and they keep that--and since my bid is beat it is lost forever. This process continues with the highest (last) bidder getting the item. Consider the psychology involved. You know you are almost certain to lose that $1 or $20 bid, but it isn't much to risk to win a new TV. Then, suppose the bidding has gone something like this $1, $10, $13, $15, $16, $17, $20, $21, $23, $25, $26, $27, $29, $31, $32, $33, $34, $35, $36 $37, $39, $40, $41, $42, $43. The charity has already collected $686 that they get to keep. But you may have put in three of those bids, and now you don't want to spend that money without getting something for it, so you bid yet again.

One major problem is that bidders will soon figure out that it is best to wait and when it looks like everyone is done, make one bid to win the auction. We could solve this by requiring everyone to bid higher or drop out , and then go to the next round and continue in this way. One interesting aspect of this sytem is that in the end the TV might be won for a bid of $60, but the winner might have actually spent $400 to get there.

Another Idea

Here's another new type of auction: pay-per-bid. Bidders pay a set fee each time they enter a bid. This raises revenue along the way without being as obnoxious as the auction described above. Paying a dollar or two for each bid is not a big deal, for example, if you are bidding on cars. It also make people less likely to "up the ante" by a dollar or two at a time. After all, you don't get the bid fees back, do why bid a dollar more than the last guy if you suspect the price is going higher and you are willing to go much higher? Because of this effect the final prices might go higher than they otherwise would. After numerous bids and fees, for example, with the current bid at $2,350 for a used car, you might jump to $2,600 to avoid more of those fees--not knowing that you could have won the bidding at $2,400.

How Much Can You Make?

Not a relevant question, since this is an unproven idea, but an auctioneer normally takes a cut of each sale or gets a fee for auctioning each item. These arrangements might work for this system as well.

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Getting publicity for such a radical idea might be easy enough, and that could get you more bidders.

Qualifications / Requirements

Okay, maybe you have to be a little bit crazy.

First Steps

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