When it comes to making consumer purchasing decisions, the power of your brain is fascinating. Within a split second of making up your mind, the brain sends a signal to your hand or finger to complete the task, whether it’s clicking a button on your phone or computer or swiping your credit card.
That’s the “how” of the process, but, have you ever wondered about the “why?” In the auction industry, especially as more and more consumers use the internet for auctions, it’s important to understand the psychology, the emotions, and the thrill of online bidding. We’ll discuss several theories and principles that will give you a better understanding of what you’re up against the next time you log on to an auction.
Don’t confuse auction fever with an illness — it’s a real psychological component that affects the way you bid on items.
A study of how humans process decisions found that escalation and competitive arousal can override rational thoughts and lead to overbidding. Social facilitation, time pressure, and the idea of being first all play a role in blinding your decision making.
Of these three factors, social facilitation may be the most fascinating psychological component. By definition, social facilitation is when you show more effort toward something due to the presence of others, whether it’s real, imagined, or implied.
In this case, there isn’t a physical presence, or an audience, since many people now bid online. Instead, seeing increased bids on an item brings out the competitive energy in you and improves your performance compared to if you were bidding alone.
There’s also the pseudo-endowment effect, which we explored in this original blog post on the psychology of bidding at auctions. The idea here is you tend to overvalue items up for sale, thus you’re more willing to bid higher and go over your original budget. These pseudo-endowment feelings increase our desires and motivation to win at all costs.
In online bidding, this begins early on in the process. The pseudo-endowment effect can begin when you view a website — we host our items on Proxybid — to see which items are up for sale. You have the ability to scroll through pictures and read item descriptions, which all plays a role in the psychological buyer journey as you can picture yourself owning the item before even placing a bid.
It then becomes a game, where you’re not only competing for the item and your own personal satisfaction, but also the satisfaction of beating others and taking away something your competitors see as valuable. A study from Princeton University found that bidders were less rational when competing for items against humans compared to a computer. They concluded people place more value when winning a bid against others, which, again, can make you more inclined to secure a purchase.
Consider this for a minute. You have your eyes set on a house for sale that’s listed at $200,000. The buyer accepts your initial offer of $195,000 and you rejoice thinking you found a bargain. Except, little did you know, the house appraises for $190,000, thus you overpaid by $5,000.
The $200,000 value, in psychology, is the anchor, which is an initial figure or piece of information you base future decisions on. In the auction industry, the anchor is the opening price that sways how you bid.
Logically, it would make sense that a high anchor price will result in you paying more. A diamond ring up for auction with a high list price may evoke a certain feeling of luxury, making it more enticing for you to bid higher.
But, the inverse can still happen. Research from a Northwestern University study published in the Journal of Personality and Social Psychology showed low opening bids led to higher selling prices. Why? A lower price created more interest and, therefore, more bids. They found the lower barrier for entry led to a greater time investment that created a higher likelihood of purchase.
Black Friday is a consumer holiday for a reason. Each fall around Thanksgiving, flyers hit your kitchen counters and emails ping in your inbox to signify the best shopping deals around. Of course, these deals are scarce, or limited, in many ways. For starters, they’re limited in quantity and limited in time, both of which compel you to make a purchase.
The same concept, known as the scarcity principle, also applies to auctions. The psychology behind scarcity puts more emphasis and a higher value on rare goods and services. Like Black Friday deals, or any special for that matter, there’s a time element and a quantity element.
Auctions aren’t like traditional stores where there are shelves and shelves full of the same product. You’ll generally only find one of the same item at an auction. Couple that with the time aspect, either limited to hours or seconds, and you may have more urgency when making decisions.
As much thought as your subconscious puts into making decisions, buying at auctions doesn’t need to be complicated. The process is meant to be fun, not intimidating. If anything, use this information as a baseline to prioritize what you want and avoid making emotional decisions.
If you’re interested in a firsthand experience, Dakil Auctioneers, Inc. holds weekly auctions in a variety of categories, such as real estate, liquidations, and consignment. Here’s a resource on how to bid online at one of our auctions.
Check out our listings for an auction near you. If you are considering selling items yourself and want to learn more about what Dakil has to offer, contact us today or call directly at (405) 751-6179.
