I’m an auctioneer, and also somewhat of a bon vivant — a foodie of sorts; I’m blessed to have eaten at some of the best restaurants in the United States from Maine to California. I’ve often remarked “my” four food groups are steak, seafood, chicken and pork.
Restaurants have to have customers to survive. It’s pretty much a numbers game — the more customers, the more profit and likewise, the fewer customers, the less profit. The restaurants I frequent are busy and for good reason.
We also run an auction house and have conducted 1,000’s of auctions there and around the United States. While there is little question in the auction industry the right bidders are more important than a bunch of bidders (and the right sellers are more important than a bunch of sellers) I offer that auctions are more like restaurants than one might think.
First, certainly if there are more bidders, there is a greater chance of having the right bidders. And with all this recent science (Facebook) in finding the right bidders, coupled with those right bidders having access to finding the auction of their choice, auctions today have unrivaled ability to maximize prices with the right bidders.
However, I will tell you bidders surrounded by many other bidders bid more than bidders surrounded by fewer other bidders. The reason? Human behavior is sometimes highly emotional, and not necessarily obvious.
When people are in a restaurant, and the restaurant is busy, the food tastes better. Now, before you say that you’ve had bad food in a busy restaurant, and good food in a lonely restaurant, my rule is of course general in nature.
The same for auctions — bidders in the company of many other bidders feel energized in thinking “they are at the right auction,” or “they are rightly interested in a certain property.” Akin to that … busy restaurants likely have better food.
Likewise, if an auction has a small turnout, bidders start to think “maybe we’re not at the right auction?” or “maybe there’s something bad I don’t know about that property I’m interested in?” Ever walk into an empty restaurant and think “Maybe we shouldn’t eat here?”
I’m not merely suggesting that there is more bidding with more bidders, but that individual bidders bid more — given other bidders are present, and bid less — given fewer other bidders are present, independent of whether or not these other bidders actually bid.
We wrote about the high bidder (the most interested) and the next highest bidder (the next-most interested,) and concluded all you needed were those two bidders. However, how do we find those two bidders? Our article on that is here: https://mikebrandlyauctioneer.wordpress.com/2010/01/12/auctioneer-looking-for-alpha-and-beta/
Indeed auctions are like restaurants — the more customers, the more profit and the more people participate in what that restaurant (or auction) is offering.
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Real Estate Showcase and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College of Business, Executive Director of The Ohio Auction School and Faculty at the Certified Auctioneers Institute held at Indiana University.