Sunday, April 8, 2007

The economics of bidding on eBay


I sell glass beads I've made on eBay. I'm sure that's a point that anyone who might be reading this blog might know, but the point I want to discuss today is related.


BACKGROUND:

About three days ago I placed a set of "orphan" beads for auction. In the eBay lampworking world, the keyword "orphans" means a large set of random beads. Compared to some beads which can sell for ... an unlimited amount per bead depending on the artist, demand, size, color, and such, orphans beads normally end up being sold for approximately $1 per bead - a steal in the lampworking world.


THE POINT:

On eBay, in which sellers have the option of selling items off to the highest bidder, there is an option where you can enter a bid for the highest amount you are willing to pay for a set of beads. The bid does not automatically go to that value, but will trump the bid of anyone else that comes by and bids less than your total amount. The rules of economics that are at play here are what interest me. As I've said, normally, these orphan sets sell for approximately one dollar per bead. In this case I'm selling 197 beads in a renovated cigar "bead box" that holds the lot. The total retail price is $580. I doubt I'll get $580. In fact, at this point with 1 day and 22 hours and 30 minutes to go, the bids are only up to $48.77. Several of the people who have bid have bid more than once and have, indeed, entered a "highest" price that they subsequently raised by re-bidding.

I understand the short-term economics at work here ... sort of. The value, to the customers of this kind of item, is contingent on the demand for that object. The aggregate demand, as stated over and over, suggests quite a higher "highest bid" than the highest bid these customers have been entering. However, it is almost as if they are hoping, perhaps, by bidding so low, others will be convinced not to bid, thus keeping the price low; saying, so to speak, "I don't really care about these and neither should you." This notion of bids and competition on eBay is very intriguing to me. I'm sure there's an official economic theory behind it and if you know what it is I'd love to understand. But, for now, I'm mostly just befuddled.

1 comment:

  1. P.S. The day before the auction end it was up to $66. It went for $177, which it reached in fast pace about three hours before auction end, at which time the bidding stopped. There were 29 people watching the auction.

    Next time I think I'll start it at $100 and see what happens. Different people with different bidding habits see it at that point. That will be interesting!

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