Reserve auctions, like on ebay, allow the seller to have a hidden price that the bidders won’t see, but has no obligation to sell the item unless the highest bid meets that reserve price. So you can sell something with a reserve of $150 but start the bidding at $1.
Is there some legitimate purpose to this that meaningfully differentiates it from other auctions, or is it just a bait and switch? The purpose is to get people to say “wow, that [whatever] is on sale for $1? maybe I can snatch it up at a low price!” but they never actually have a chance of doing this. It just wastes their time if they only ever intend to bid up to $100 on this item that has a reserve of $150, even if they end up being the highest bidder.
So it seems to me like this is just purely fraudulent - it’s not really different than if the item title said “selling 2 for 1 widgets!” and then when you get to the actual listing it says “lol just kidding I’m only selling the one”.
So before I start ranting about how stupid and obnoxious it is, I thought I’d ask if there was some key factor I’m missing that actually makes reserve auctions useful and different and justified somehw.
Legitimate as in perfectly honest? No. It is simply a sales tactic to get more eyes on a sale and get around pricing filters. The hope is that the extra attention will make someone decide they want it at the price the reserve is set or get someone actively involved and therefore emotionally invested in the auction so they will keep going until they meet the reserve.
It doesn’t make much sense to me either (though I don’t see it as deceptive)…but from what I understand an auction with a starting bid of $1 and a reserve price of $150 is generally a lot more likely to be successful than one with a starting bid of $150.
It’s helpful in the case of collector items which may have a highly variable value with a small audience, to prevent an item from selling too far below market value. There is a portion of the eBay population out there that makes living by simply reselling items purchased for ridiculously low prices for whatever reason.
It protects the seller. If they aren’t willing to risk parting with the item for less than $150, but can’t put a reserve on it, they won’t put it up for auction in the first place. And that deprives the marketplace of their item.
If the seller puts on too high a reserve, they are only hurting themselves, as the item will never sell.
It’s not deceptive. A little devious, perhaps, but fraudulent? No. These types of psychological games are played all the time. At least in law, there’s a higher bar (e.g. when it turns into outright lying or failure to disclose material facts when there is a duty to do so) before schemes become actionable as fraud.
You can think of it as the owner, bidding against you for the object. If I had an item worth $1000 and it was about to be sold for $5, I would bid on my own object to get it back rather than sell it at that low of a price. A reserve is just a structured way of doing that.
But if that were the only reason for it, they could just start the bidding at the same price as their reserve price.
It’s really to drum up interest and get more eyes on the item before the end of the auction. More people looking at and bidding on the item will result in driving up the price of the item each time one buyer outbids another.
That doesn’t answer the question–the starting price system already allows sellers to protect themselves against selling for too little money.
It’s all about psychology. You get buyers emotionally invested when the price is low, and as the auction gets close to the end, the buyers are likely to bid prices past what they would have bid in the beginning.
The converse of this feature, on the buyers end, is sniping. If everyone were perfectly rational, it wouldn’t be necessary or useful. But in practice, it does help to avoid bidding wars and thus reduces the impact of irrational bidding.
Which would never get anybody’s attention. They’d just blow it off as too expensive. But if the bidding is all going on under $100, people will jump in and try to get a deal. That drives the bidding up, gets more views, and the price rises rapidly to above the reserve (the seller hopes.)
If someone is only willing to spend $50 on a widget, and the seller will take no less than $100, then the seller is wasting the buyer’s time by putting the bidding up at $1. You’re saying “it’s an auction, you might be able to get the item at the low price you want to pay for it, except… lol nope, no matter whether or not you win the auction legitimately, I’m not going to sell it to you”
It doesn’t protect anyone. You can just start your auction with a starting bid of $100, so there’s no chance you’ll sell your item for something you’re not happy with. You are just using a bait and switch - you’re getting someone in there, viewing your auction, under a false premise. You’re saying “what you saw in the listing - selling my item as an auction starting at $1 - isn’t what I have for sale, but as long as you’re here, you can maybe conduct the transaction I want to conduct with you…?” - which is pretty much the exact same thing as a bait and switch to me.
Well, there is allowance for the seller to contact the highest bidder of an auction that did not meet the reserve price and make them a “Second Chance” offer. Not that that’s the most honest or efficient way to conduct an auction, but it does make a little more sense from the seller’s perspective.
I agree with everything you’ve said, and as a bidder, reserve auctions piss me the hell off.
The only reason I can think of why they would be allowed is that they’re more honest and aboveboard than doing what sitchensis mentions, where the seller himself (or his proxy) makes a bid to ensure that the item doesn’t sell for less than a certain amount. Perhaps ebay hopes to deter this kind of sneaky tactic by allowing reserve auctions as an alternative.
Another valid reason is that it tells the seller how much the item is worth without having to take risks. If you just start at what you think is close to the market price, you’ll never know if you priced the item slightly too high, or 10 times too high.
Reserve auctions are nothing new, they are not a trick, they are an accepted way of auctioning items.
The seller is placing the items up for auction because they want to sell them. A large reserve does not help sell the items, it is counter productive.
The only complaints I have seen about a reserve are that they do not allow you to rip off the seller ie. get an amazingly great deal. You seem to be approaching this as a game in that there are two parties with equal rules. The problem with this approach is that they are the owner and you are the bidder. You do not have an equal claim to the items, the rules aren’t and shouldn’t be set up to treat you equally.
You’re missing the point. The complaint isn’t really about reserve prices being too high, it’s about having such a wide range between the starting price and the reserve.
Now you’re really missing the point. Nobody is complaining about their inability to ripoff the seller. (where did you see that?!) They’re complaining about a marketing gimmick that wastes their time.
I’ve been to several horse auctions this year.
The owner has this same option – the auctioneer will look to them, and they can “no sale” the horse if the highest bid is too low. Sometimes they even put in the auctioneers instructions the lowest bid they will accept, if the owner can’t be present at the auction.
In cases like this, does the owner/seller also set the minimum opening bid?
The big question that this thread is asking is, if the seller has a “lowest bid they will accept,” why not just make this the minimum opening bid?
As others have noted, there are advantages for the seller to start low and have a higher, hidden reserve, but these all seem, from the bidder’s point of view, like an annoying attempt on the seller’s part to have it both ways: to have the item show up on “lowest price first” sorts, and to gain the attention of (and waste the time of) potential buyers who’d be willing to pay a lower price but not the reserve price.
Because, like I think other people have said, that discourages bidding. If the minimum price you’ll accept is $100, you’re more likely to get bids above $100 than if you start the bidding off at $5 than if you start the bidding off at $100, because somebody who wouldn’t put an opening bid of $100 on an item might, if he found himself in the middle of a bidding war, bid over $100 for the item. When people are actively bidding, that drives the price up, and somebody who’s already made a bid for an item will tend to value that item higher than somebody who hasn’t. It’s much easier psychologically to go from a $100 to a $105 bid (Eh, what’s 5 more dollars?) than to go from a $0 to a $100 bid.
I hate reserves too, but I think the whole “tiny starting bid with a hidden reserve” has a valid use that a minimum starting bid doesn’t – it can let a seller see how much people are actually willing to pay for the item, and decid if it’s worth selling. And the bidders are always aware that there’s a reserve they haven’t met yet…