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Auction bids decline with intensity of competition: new research | PHYD.org

Economists from the University of Sydney and the University of Technology Sydney (UTS) have co-authored a new study that challenges conventional thinking about auctions and is applicable to real-life bidding situations including property auctions.

The study suggested that the more bidders there are in an auction, the lower each individual bidder perceives their probability of winning, which has demotivating effect on their desire to win the auction.

“This is a counterintuitive finding because usually auctioneers would assume that the more bidders there are in an auction, the more money they will make—the logic being that that the more bidders there are, the more likely it is that there is a bidder with a high willingness to pay for the good,” said co-author Associate Professor Agnieszka Tymula from the University of Sydney’s School of Economics.

“However, it turns out that there is also a downside to having more bidders—most people bid less.”

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Auction bids decline with intensity of competition: new research.

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