Minor Ebay Rant: Reserve Prices

I don’t like reserve prices on Ebay and don’t think they’re effective, but I understand why people use them. What I don’t understand is listings where the seller tells you what the reserve price is. I mean, why? The whole point of a reserve price is that sellers don’t know what it is, and will start up the bidding on an item because the think their bid might be over that price. So why tell them outright “I know the bidding is only at $X, but you won’t get it unless you bid $X+Y”? Are these sellers just stupid, or is there some subtlety that I’m missing here?

eBay charges higher fees for higher starting bids. By setting a reserve price, the seller might pay a lower insertion fee by using the lowest-fee starting bid range plus the reserve price fee than he would by setting the starting bid at the minimum he’ll accept.

You’re one up on me. It’s been years since I’ve purchased anything from an eBay seller, but I’ve never understood the use of a reserve price. If you’re unwilling to sell an item for less than the reserve price, why not just start the bidding at that price? Seriously, what am I missing here?

One reason is that people like bidding on items that already have a lot of bids. It makes them feel more secure that the seller is legit if a lot of other people have already bid on the item. So, by the time the reserve price is hit, there are already a few bids, which may bring in even more bids later on.

A hidden reserve can help get the bidding process started, involving bidders in the auction who might not have entered a bid if the reserve were visible. Additionally, even if the reserve is not met, the seller can still offer the item to the highest bidder at their own discretion. This might be useful if you’re unsure of the value of the item, and want to test the water. The main disadvantage of hidden reserves versus starting prices on eBay is that the former cost more to list.

I also just found a study (warning: pdf) that found that secret reserves depressed prices and lowered the probability of the item being sold, when compared with identical auctions run with a visible starting price. It’s not particularly exhaustive, but it seems to show some decent enough results if you think Pokemon cards are a useful indicator. :slight_smile:

See my last.

Here is the fee structure on eBay. Let’s say you want to sell an item for a $600 starting bid, which is the minimum amount you’ll sell the item for. The insertion fee would be $4.80. If you listed the same item with a starting bid of $0.01, your insertion fee is $0.25 – a saving of $4.55. To ensure that you receive at least $600, you’ll have to set a reserve price. In this case it would cost you $6.00 for a total insertion fee of $6.25. Doesn’t sound like a good deal, except the reserve price fee is fully refunded if the item sells. If the item sells, then posting the auction only costs $0.25.

Now, if you’re selling something for hundreds of dollars, does it really matter if it costs you $0.25 or $4.80 to list it? Probably not. But a low starting bid can entice people to bid on your item, or at least put it on their watch list. If I saw an Arriflex SRII with a starting bid of $10,000 I’m unlikely to watch it, let alone bid on it. If I see it starting at $1, I’m likely to at least put it in my watch list. If the reserve price is stated (say, $15,000 for an Arri) I’m not going to bother; but that’s just me. I don’t want an SRII that badly. But a low starting bid is likely to attract people’s attention even if the reserve price is revealed.

I need to type faster.

The subtlety you’re missing is the “feeding frenzy” aspect of eBay. Let’s say I have an item I want to get at least $100 for. If I start it at $100, people might look at it and think, “Gee, that kinda expensive”, so it just sits there and nobody ever bids on it. It ends up not selling. But if I start it at $25, somebody’s sure to bid on it, and then the feeding frenzy starts. People look at it and think, “Oooh, oooh, Mr. Kotter - I want that 'cuz somebody else wants it.” Somebody else bids. Then the first bidder says, “Ooooh, ooooh - somebody outbid me; now I have to win”. Pretty soon, it’s up to 100 bucks. Of course, it’s a risk; you might not get a good feeding frenzy happening. The reserve price eliminates the risk. Like the OP, I used to think it was strange to disclose the reserve price, but I don’t think that anymore, and here’s why: The big reason people don’t bid on reserve auctions is that they’re put off by the fact that they don’t know what the reserve is. If you tell them what it is, you eliminate that obstacle. Now you would THINK that, knowing what the reserve price is, nobody would bid less than the reserve price, because they would know they can’t win the auction at that price. However, people DO exactly that. So you’re getting the advantage of having all these low bids coming in, attracting people to your auction, without the risk of having to sell for less than you wanted.

I’m not advocating one way or another; I think they both have their merits.

At least you’re not as slow as I am. I really got beaten to the punch.

I never have shown my reserve, but it is irritating to get so many e-mails asking what the reserve is. I gave up on reserves most of the time and just set the opening amount as the min I will accept - partly because of dumb e-mails and partly because people have been so put off by snipers that they only want to ‘but it now’ or pay the asking price and not go thru the bidding. It appears to me that ebay is asleep - every category I check, the sales a very weak and only the cheapest junk is selling at all.

“Put off by the snipers”? In other words, they think they’re entitled to never be outbid. :rolleyes:

I’m someone who doesn’t like reserve price auctions. I’ve bid on a few, but I’ve found that people with such auctions have an over-inflated view of what thjeir goods are worth. I’ve also seen business built on the marketing model of offering everything at 1 cent, with no reserve price: they seem to do just fine.

And I don’t mind snipers. When I get sniped, I just tell myself that I ought to have bid a higher price, or that the stuff really wasn’t worth the higher price. Bidding at autions is an uncertain game: you can’t tell if you’ve won until the game is over. If you can’t stand that uncertainty, then you’d better not bid at auctions.

That can be risky. I put a $2,000 reserve on a vintage Rolex (it sold for about $2,400) because there’s no way I’d risk not getting at least what I paid for it.

There’s a difference between the risks in a one-off transaction like that, and a business where you (say) sell hundreds of second-hand CDs. As long as you average your cost price plus a reasonably markup, it doesn’t matter if you sell some CDs at 1 cent each: the CDs that you sell for over a reasonable market price make up for that.

But in any case, eBay offer the seller a choice of a opening bid at a level you are willing to sell for, and a reserve price with a lower opening bid. As a buyer, I don’t like sellers to have secrets from me, thouugh I do understand a minimum biu of a valuable item.

Thanks for the answers to my question. I didn’t see your initial post, Johnny L.A., when I previewed my post.