Participating in online auctions can be rewarding and fun, but it can also turn out very badly if you end up overbidding. In order to avoid feelings of shame and regret stemming from an overbidding episode, read along to understand some of the situations that may cause this kind of behavior, and what you can to keep it from happening to you.
How auction websites get you to overbid
Many auction websites use certain tactics to entice customers into participating auctions, and also in order to get them excited (in other words, hype). They do this by generating a lot of excitement around the auction, having strict deadlines for when auctions ends, and making both the winners and the losers of the auctions visible to everyone. Apparently, these are strategies employed by many auction websites that may cause participants to overbid.
There are several reasons or situations that would cause a person to overbid under the influence of these tactics. First off is the “winner’s curse”. This occurs when the person bidding overbids because they have incomplete information regarding the real value of the item up for auction. In most cases, the bidder has made an incorrect assumption about the value of the item and overbid accordingly. They end up winning, but this turns out to be a “curse” as they have actually lost money in the end for having overpaid for the item. In general, the more bidders participate in an auction, the higher the probability that one (or more) will overestimate the value of the item up for auction, overbid, and win the auction. This situation is especially common in silent or “sealed-bid” auctions, where the bids are private and submitted simultaneously, and the highest bidder wins (who has in many cases, overbid due to overestimating the value of the item). So, if one of the participants has significantly overbid for an item during an online auction, clearly they will win the auction, but that won’t necessarily be a good thing.
Winning no matter what
Unlike the winner’s curse, in the next case of overbidding, the participant is well aware of the value of the item and overbids anyway. Why would they do that? This type of situation occurs when the participant becomes too committed or too involved in the auction and decides that they must win no matter what, almost as a matter of self-justification. Meaning, even if the bidder knows hat they are overbidding, and therefore will be overpaying for the item when they win, they decide to continue participating anyway in light of the time, effort and money they have already invested in the auction. Some bidders may reach this point at some point during an auction and decide that quitting is no longer an option because they have already invested in the auction and must win at any cost, even if it means overpaying.
When competition happens to you
Another possible overbidding situation is when a participant finds themselves overbidding during an online auction simply because they have been influenced by competition. Meaning, their competitive spirit or drive takes over and they bid more than they should. Any competitive situation can cause people to behave illogically, and online auctions are no exception. In fact, bidders may be motivated to overbid more by the idea of winning the auction (and beating the competition) rather by than the idea of acquiring the item that is up for auction. This competitive feeling can be inspired by rivalry (the participant wants to beat someone in particular), social image (everyone is watching), or even time pressure. This type of overbidding situation often occurs during live auctions.
If you’re apprehensive about participating in online auctions because you’re worried that overbidding could happen to you, you’re right. Whether you participate in auctions often, or it’s your first time, anyone can fall into one of the above situations and end up overbidding during an auction. In general, though, the people that are more inclined to overbid are those that are more emotional, competitive or impulsive. So, if you think of yourself as having any of these traits, then be careful when you bid online. Especially people that care about what others think, or become overly competitive or sensitive when they feel challenged by others should watch out for their own behavior during online auctions.
Tips to avoid overbidding
If you want to participate in online auctions, but want to avoid these overbidding traps, make sure you are prepared going into the auction. You can be prepared by doing your research. You should know the real value of the item up for auction, read the description of the item very carefully, and familiarize yourself with additional costs or fees that will be added to the final cost if you win. Now you’ll need to decide exactly how much you are willing to bid on this item and commit to not going above that amount, no matter what. Meaning, you’ll need to make a deal with yourself that you will not be an emotional or competitive bidder, and will bow out when the time comes. If necessary, write down your final (and non-negotiable) bid amount and keep the paper next to you during the auction. If you find that you just can’t control yourself, then online bidding probably isn’t for you.
Another tip is to use proxy bidding if it’s available. This system allows you to tell the auction website the maximum amount you’re willing to pay (and bid) on the item, and you will automatically be pulled out of the auction when you reach that amount. This is especially good for participants that have a hard time keeping track of how much they’ve spent as the auction goes on.
Finally, patience is a virtue when it comes to online auctions and avoiding the trap of overbidding. If an item is up for auction online, it will probably become available again, so remind yourself that just because you don’t win this auction doesn’t mean you will never win the item at auction in the future.
If you’re going to participate in online bidding, the most important advice you should keep in mind is to avoid the traps of overbidding. Whatever you do, don’t get overly competitive or emotionally involved with an auction, and always do your research ahead of time.