Guest Post: Understanding the Bidder Brain (Part 1)

Understanding the Bidder’s Brain (Part 1)

All too often bidders end up overbidding as a result of one unavoidably irrational part of the bidding process – themselves.

The allure and tension of an auction are familiar to most of us – let’s face it, we all like the idea of picking up a bargain. Silent auctions allow us to share in the excitement of auction bidding without the public exposure of a traditional auction. Yet somehow, despite their better judgment, the bidder often ends up paying more than he or she expected or should have for that trip, collectible or special restaurant dining experience. Why is that?

This has nothing to do with the way a typical silent auction bidding system works. In fact, unlike most auctions, the silent aspect of the auction bidding process would seem to be designed to promote a more rational bidding process. No, the reason silent auctions so often produce higher sale prices than any bidder originally imagined they would pay is because of one irreducibly irrational part of the bidding process: the bidders themselves.

In contrast to an open or public auction, where items go up for bid one at a time for a limited time, a silent auction keeps the bidding for all items open for the entire length of the bidding window. Bidders can, and do, repeatedly check the status of their bid and react if they have been outbid.

Because of this, silent auctions push a number of the bidders’ psychological buttons. In fact, the phenomenon of “auction fever” is well documented. Silent auctions are social occasions, with lots of other people around, and this tends to increase physiological arousal, an effect called social facilitation. Arousal causes increased adrenaline: your heart beats faster and your reactions quicken. This is ideal for something like sports, but makes rational decision making harder. On top of this, silent auctions allow for extended competitive bidding where bouts of anxiety at being outbid can occur.

Organizations that understand these dynamics can capitalize on them to optimize the results of their silent auctions, and in turn increase revenue.

In our next blog post, we’ll discuss the role and impact of the bidder’s imagination.

by Stuart Maudlin

President, Silent Auction Services

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