Psychology of Auctions?

September 27, 2006 5:09 PM

I have a question about the psychology and ethics of auctions. I have only participated in a handful of online auctions, but the other day I got caught up in an eBay auction that has got me thinking about the nature of auctions ... and curious about whether my actions were ethical.

The item I wanted (a bit of pop-culture ephemera from the eighties New York art scene) was at a very low price until the last ten minutes of the auction, when a bidding war began between me and some other person, who apparently wanted this item very badly.

At first I thought I could outbid my rival, but no matter what price I put in, the person kept topping me. Pretty soon, I was bidding way more than I even wanted to pay for the item, and from that point on, my bidding was motivated by two mingled desires: (a) my curiosity about how high this person really was willing to go, and (b) a spiteful desire to make this person pay very dearly for this item, if he/she were in fact to emerge triumphant from the auction. Turns out, I did not win the item, and the price at which the auction ended was several times what it had been at the beginning of the last ten minutes.

Now, if I had won the auction, I would have (of course) grudgingly paid up and bought the item, but I really did not want the item at that price and I was hoping, during much of the time that I was bidding, that I would not win and the other bidder would be obligated to pay a ridiculously high price for the item.

After the auction, I was struck by how I had been caught up in it and wondered whether this is, perhaps, an integral part of what makes an auction an auction ... a kind of agonistic psychology pitting one person's pocketbook against another person's, to the extent that the desire for the product falls away and it's just a primal contest of my money against the other bidder's money.

So here are my questions:

(1) Is this a phenomenon that has been remarked upon or studied elsewhere?

(2) And, to the extent that I was motivated by sheer spite against the other bidder, and was bidding more than I wanted to pay (even though I would have paid it), were my actions unethical by any accepted standard?

posted by jayder to shopping (32 comments total)

Are you sure that you were actively bidding against another person, or were you in fact bidding against that person's maximum bid, which he/she had placed some time beforehand?
posted by Neiltupper at 5:15 PM on September 27, 2006

The Ethicist (Randy Cohen) in the New York Times Magazine tackled the topic of eBay auctions several weeks back (9-3-06, to be precise). To summarize his thoughts, auctions are a request by the seller for an open market- all parties will bid a price they are willing to pay. You did not force the other person in your auction to keep bidding; they apparently wanted the item badly enough to continue to outbid you (who knows, maybe they're aware of the hidden value of the item and you were just driving it up to its rightful price!). Your auctions were not unethical; they would have been unethical had you driven up the price and refused to pay, or had you driven up the price of a item where some profit of the sale would benefit you, or had you worked with someone else to restrict bidding on items (something that would be illegal in a physical auction house, according to the Ethicist).

On the other hand, why are you bidding high prices for items you don't want? Next time you're that bored, paypal me your highest bid amount, and I will give you some things to do. The desire to win an auction at all costs sounds like a gambling addiction (not that I'm saying you have one; just that the drive might be similar). I don't necessarily think it's wrong to bid for things you don't want, as long as you keep it within reason- I saw a charity auction earlier in the week for a lunch with a top magazine editor going for $9 (yes, the one you may have seen linked to on Gawker). I said, ouch, that must hurt, and I'd be willing to pay... $30 to have lunch with this person, so I bid. I was the high bidder for about... 5 seconds.
posted by ThePinkSuperhero at 5:23 PM on September 27, 2006 [1 favorite]

You were likely bidding against eBay's computer, which keeps topping up the bids until there's only one maximum bid standing. And you still don't know the winner's maximum bid. There was an excellent AskMe thread on sniping recently.
posted by weapons-grade pandemonium at 5:26 PM on September 27, 2006

Turns out, I did not win the item, and the price at which the auction ended was several times what it had been at the beginning of the last ten minutes.

This is the case with every single auction on eBay that is for an item that does not appear there super regularly. In fact, I'd wager that on the majority of auctions I've participated in, the action takes place in the final minute. I always bid (no joke) in the last 4 seconds and I use sniping software to help me do it.
posted by dobbs at 5:27 PM on September 27, 2006

Neiltupper: Sorry, I should have clarified --- I am sure I was bidding against that person's maximum bid.

TPS: Yes, I agree it sounds like a gambling addiction, but I've never fallen prey to the feeling before. When I go to a casino (rarely), I gamble $30 and stop. I don't enjoy losing money like that.
posted by jayder at 5:28 PM on September 27, 2006

(1) Is this a phenomenon that has been remarked upon or studied elsewhere?

I used to work for Sotheby's, and it was definitely noted there. Bidding frenzies are known and loved in the auction business. It's what keeps companies like Sotheby's, Chritie's and eBay rich. It's VERY common for such frenzies to drive end-prices WAY above retail. So, whereas you can buy a new iPod for $300, you might find yourself getting so caught up in an auction (that starts low), that you wind up buying a USED iPod for $400. Happens ALL the time.

(By the way, while I was working at Sotheby's, my dad sold an old movie poster (1930s "King Kong") there. He'd bought it years earlier, at a garage sale, for $5. He sold it for 80 grand! Because I was an employee, Sothebys took a much smaller cut than they normally would have. And the coolest thing was that they put the poster on the cover of their catalogue!

And NOW someone is selling that catalogue on eBay!
posted by grumblebee at 5:47 PM on September 27, 2006 [2 favorites]

This phenomenon is why auctions make money. The way to win an ebay auction (in every sense) is to wait until the last 10 or 20 seconds and enter the most you are willing to pay. If you don't win then you don't win - nothing lost as you could not afford any more. If you do win you haven't overspent and have not let adrenaline or your bidding partner get the better of you. Getting into a bidding war is fruitless as most people will always keep going for reasons other than acquiring the item for sale at the right price.
posted by fire&wings at 5:51 PM on September 27, 2006

I think you are ok ethics wise, I have gone over $9000 on items I bought (for the business, on personal stuff I am frugal)
and there is a real rush watching the last minute bids get in.
Sometimes when I check the bidding history and see that someone just pecking out a half dozen incremental bids has cost me a few hundred extra I may be a little miffed but it is all part of the game and just adds to the excitement.
Perhaps your opponant will value this item more because of you.
posted by Iron Rat at 6:08 PM on September 27, 2006

You the money the bidder ended up paying was not destroyed. It went to the seller. Your actions didn't do any harm in the big picture, rather they shifted weath around without creating or destroying it.

I'm sure you knew this, but it doesn't seem like you felt it to be true. The same actions that harmed the buyer helped the seller.
posted by I Foody at 6:20 PM on September 27, 2006

I think it's just a n00b thing. With a few more auctions under your belt, it won't be "personal" any more, you'll stay focused on whether you can get the item, and once the price rises beyond what you want to pay, that auction will hold no further interest to you.
posted by -harlequin- at 6:21 PM on September 27, 2006

I'm not sure. After a certain point, when you didn't want the item, driving up someone else's price for it might be an ethical borderline. On one hand, the other party made a prior committment to honoring the larger amount he/she actually paid. But on the other hand, you drove up the price just for your own personal curiosity or pleasure. I'm not certain that your pleasure can justify making the other person pay more.
posted by ontic at 6:27 PM on September 27, 2006

I agree with everyone, this is what auctions are all about. I find myself getting antsy if I actually check auctions as they go, having bid. The key to eBay, as pointed out, is setting a maximum and walking away until you get an email saying yea or nay.

I do recommend sniping software so that another party doesn't get into a froth bidding against your maximum. Sniping isn't as effective if there's a BUNCH of people who want it, but if it's you and one other person who have the Jones for it, it can help.

And just make it a rule to carefully consider your bid, put it in, and don't change it NO MATTER WHAT. Else, you will get swept up...and this sounds dumb, but it's happened to me: make sure you cant find the item new elsewhere for less!
posted by maxwelton at 6:28 PM on September 27, 2006

Try this: A shopkeeper has an item on sale in an auction-type way. Say it's a diamond ring (his diamond ring, to account for I Foody's astute observation). Some other person is already there, negotiating a price of $500. You come in, thinking that you would pay up to $1000 for the ring, but wouldn't want to pay more. The other person says, "Ok, $1100." At this point, you say, "Really, how high will you go? $1200." "1300." "1400." and so on, all the time you know that after $1000, you're going to give in to his bid.

Since the diamond seller was willing to take $1100, it seems that each bid after this just to test how much the other person wants to pay is a little cruel, if he or she does not have infinite funds.

So I think it can be unethical, even if it is how auctions work. But I'm willing to see disanalogies or different interpretations.
posted by ontic at 6:54 PM on September 27, 2006

This phenomenon of not wanting the item you won in an auction at the price you were finally bidding at is fairly well studied behavior - usually called "the winner's curse" (I know it has been studied in auctions, IPOs and corporate takeovers [which are really just varieties of auctions]).
posted by milkrate at 6:59 PM on September 27, 2006

eBay is designed to ensure that the person willing to pay the most for an item gets it. It doesn't matter whether you're willing to pay more for the item because you value it more, or because you're richer and have a bigger eBay budget than the other bidder, or because you love the idea of winning so much that you're willing to pay an astronomical sum just to win, or because you're enjoying the bidding process itself enough to risk overpaying. The fact is that you were willing to pay the amount you bid for the item, and you would have paid it if you had won. You didn't force the other bidder to pay any more than they had already contractually agreed to pay. Your motives for bidding are irrelevant, and your actions completely ethical.
posted by decathecting at 7:31 PM on September 27, 2006

Ontic, the difference between your scenario and eBay is that on eBay, when you say "$1400," you are contractually obligated to pay $1400 for the item. You're not just testing the waters to see how high the other person will go; you're making a legally binding commitment to pay that much. Clearly, you would be stupid to bid more than you actually want to pay for the item, but that doesn't change the fact that you will, in fact, pay that much, assuming you don't violate the eBay rules by refusing to honor your bid. That obligation helps to ensure that bidders don't make bids willy-nilly just to be "cruel," because they run the risk of having to overpay for an item they didn't want that much. The other bidder always has the choice to refuse to outbid you if s/he doesn't want to match your price.
posted by decathecting at 7:47 PM on September 27, 2006

100% agreement with decathecting. If the poster would've paid for it - who cares if the other person ended up winning. The poster would have had to pay if SHE lost the gamble to bid higher - that is, because the poster is an ethical person.

If the poster wouldn't have paid, that's another story.
posted by orangeshoe at 7:49 PM on September 27, 2006

Thanks for all these interesting answers.

I forgot to mention, my wife told me the buyer e-mailed us (it's actually her eBay account I was using) and said something to the effect of, "I went way overboard on that auction; I'll be happy to sell you the item if you still want it." I haven't responded yet.

My newness to eBay is such that I didn't even realize one member could directly contact another member.
posted by jayder at 8:02 PM on September 27, 2006

(1) Is this a phenomenon that has been remarked upon or studied elsewhere?

This isn't precisely the same thing, but your question reminded me of something I read a while back. The economist Martin Shubik used to play a game at parties where he'd offer a dollar to the highest of two bidders. The starting bid was a penny, and the catch was that both the winner and the loser would have to pay their bid even though only the winner would be awarded the dollar. He'd end up making about $3.00 on average per game. Once people started bidding, they were extremely reluctant to lose. First there was the possibility of making a profit. However, once the bids hit the $1.00 mark a different kind of logic comes into play. People would rather place a winning bid of $1.01 and end up losing only $0.01 than stop bidding and lose $0.99, and they'd definitely like to see the other person lose more, so the bidding continues. You can read a brief description of the game in Laszlo Mero's book Moral Calculations (it happens to be the free excerpt provided on Amazon).

eBay doesn't make the losers of an auction pay their bids, but there's a competitiveness there nonetheless. People want to win, and so when their bid gets trumped by another user they may feel spurred to get back on top by offering a yet higher amount, even if they would have balked at paying that much in another context. If they win the auction, there's the victory in having snatched the item away from the other bidders. If they lose, they can feel vindicated in knowing that at least the other guy had to pay more for it.
posted by Aster at 8:08 PM on September 27, 2006 [2 favorites]

If the poster wouldn't have paid, that's another story.
posted by orangeshoe at 7:49 PM PST on September 27

In June this year, tickets to the Ashes test series (cricket, Australia vs. England) to be played in Australia in December/January went on sale. These tickets are in HUGE demand. In a nutshell, scalpers managed to hack the ticketing systems and bought a gigantic percentage of the tickets and jammed the phone and internet servers. These tickets appeared on ebay Australia within an hour of them going on sale. The next few days saw an insane bidding war between people who had set up accounts called 'fu**scalpers' etc, with auctions resulting in bids of upwards of $100,000. These buyers would retract the bids with seconds to go in the auction or just refuse to pay said amount.

If your intentions were to drive up the auction as high as possible and the withdraw your bid as such, then your actions would have been unethical. But IMO, you were participating the way most people would in an auction environment.

Although, in the case of the cricket tickets, personally I think the sock puppets were doing a great jobs of scamming the scalpers (I missed out on tickets =( ).
posted by cholly at 8:25 PM on September 27, 2006

jayder (and I say this to you because you claim to be a n00b, and I've been a member since... forever), be wary of anyone trying to sell something to you off the site. If something goes wrong, there's no official way to complain to eBay. They warn against that sort of thing all the time.
posted by ThePinkSuperhero at 8:26 PM on September 27, 2006 [1 favorite]

jayder: I forgot to mention, my wife told me the buyer e-mailed us (it's actually her eBay account I was using) and said something to the effect of, "I went way overboard on that auction; I'll be happy to sell you the item if you still want it." I haven't responded yet.

I'm not 100% here, but that may well be against ebay's stated rules. If you find yourself tempted to buy it, make sure that you're either A) not breaking the rules, or B) not going to get caught (thus avoiding any kind of trouble that will get your account taken away or what have you.)
posted by Meep! Eek! at 8:50 PM on September 27, 2006

Ok, one more attempt at this then. If you knew that the other guy's maximum price was $2000 and you only really wanted to spend $1000, bidding up to $1900 just out of spite would be a little malicious, no? It seems this is what the poster's case is, except without knowledge of the maximum bid. It still seems sort of strange to me to say that because the poster is taking more risk, the action is ethical.

The fact that ebay is designed for this is ethically moot. It would also be designed to allow someone to buy something just so that someone else doesn't have it. Perfectly legal, but possibly unethical. Motives do matter. Whether an action is ethical or not doesn't always depend upon what system one is acting in and whether that system takes account of intentions.

(By the way, jayder, I'm not saying you have committed some grave moral wrong -- having to confess it or something. On the grand scale of things my thinking would make this at most a minor infraction.)
posted by ontic at 10:39 PM on September 27, 2006

I don't think unethical since it all passes the transparency test but sure, a case could be made for minor immorality: I supposed in the case where you ultimately lose it could considered immoral or at least rather mean-spirited to play on anothers emotions and purposely manipulate them into doing something to their own detriment, and in the case where you win it could be called immoral to be a poor or wasteful steward of your own resources.
posted by scheptech at 10:48 PM on September 27, 2006

I think ontic and scheptech say it well. "Mean-spirited" yeah.
posted by pointilist at 11:10 PM on September 27, 2006

"... I forgot to mention, my wife told me the buyer e-mailed us (it's actually her eBay account I was using) and said something to the effect of, "I went way overboard on that auction; I'll be happy to sell you the item if you still want it." I haven't responded yet. ..."

Troll alert, folks.
posted by paulsc at 11:55 PM on September 27, 2006

Ontic, I'm still not clear on what ethical rule a person is breaking by bidding the item up to a higher price, so long as the bidder is willing to pay the higher price if he wins the auction. Is it unethical to have a less strict budget than other people? Is it unethical to buy things that you like for reasons other than that the price is low? Is it unethical to consider shopping on eBay to be a fun game that you play for its own sake sometimes, just as some people consider shopping to be a hobby that they do because they like it, not because they really need the items they're shopping for?

I consider bargain shopping to be a hobby, and I like to bid for stuff on eBay just because I find the hunting and bidding and waiting to see whether I've won to be a fun activity. Is that unethical, because it means that I'm willing to pay a little more for things than would someone who is just looking for cheap stuff they need? I'm just not sure I understand what ethical rule you're applying in this case.

Contrary to other posters' arguments, no one was "manipulated" into doing anything to their own detriment; the other bidder put in his maximum bid before Jayder started bidding, so he had already decided how much he was willing to pay even before Jayder saw the item. All Jayder did was bid amounts that he was willing to pay for the item, which had the effect of forcing the other bidder to shell out more of the money he had already committed in his bid.

Try this analogy: say you're in a clothing store, and you see a shirt you sort of like, but don't love. There's only one of that shirt left in your size, and you know that if you don't buy it, the price will be marked down 50% in the Super-Duper-One-Day-Sale that the store is having tomorrow. The price is a little steeper than you really want to pay for the shirt, but you have a few extra bucks in your pocket, so you can afford to overpay a little. Would it be unethical of you to buy the shirt, knowing that there could be someone who wants it more than you do, but who isn't willing to pay full price for it, who would buy it tomorrow at half price if you didn't snatch it up today?

Now imagine you're in the same situation, but there's a woman standing next to you who says, "I love that shirt. Too bad I can't afford it." Now is it unethical for you to buy the shirt, which you like, but not as much as she seems to like it? Should you leave the shirt there (risking a third person who likes it even less than either of you do, but is a millionaire with no clothing budget, snatching it up), or is it okay to buy it at a higher price that you can afford, but the person who likes it more can't or won't pay?

I think that the fact that you don't know how much the other bidder's maximum price is makes all the difference, because it means that you can't just bid willy-nilly to drive the price up without putting your own money at risk. That risk creates incentives to bid only as much as you want to pay for the item. I consider it irrelevant whether you wanted to pay that much for the item because you valued the item that much or because you valued the experience of playing the bidding game that much. There's nothing whatsoever unethical about bidding on eBay with motives other than getting the lowest price possible.
posted by decathecting at 8:23 AM on September 28, 2006

"... I forgot to mention, my wife told me the buyer e-mailed us (it's actually her eBay account I was using) and said something to the effect of, "I went way overboard on that auction; I'll be happy to sell you the item if you still want it."

Second paulsc's comment. It's possible--perhaps even likely--that the other bidder is in fact a sock puppet of the seller, and was pushing up the bidding price in order to ascertain exactly how high you were willing to go.
posted by DevilsAdvocate at 8:32 AM on September 28, 2006

Second paulsc's comment. It's possible--perhaps even likely--that the other bidder is in fact a sock puppet of the seller, and was pushing up the bidding price in order to ascertain exactly how high you were willing to go.

This did occur to me, though I initially dismissed the idea. The winner, who sent me the message, has only bought one other item on eBay. I don't know whether a minimal eBay history makes it more or less likely that he is a sock-puppet, but it's an interesting possibility.
posted by jayder at 9:55 AM on September 28, 2006

In my opinion, once you stopped trying to win the auctin and were bidding only to see how much you could make the other person pay you crossed the ethical line. It's wrong, but it's also a risk the winning bidder was willing to take.
posted by JamesMessick at 10:17 AM on September 28, 2006

EBay always says you won an item. They do that to reinforce that sense of competition in bidding. A friend at work just told me a very similar story about being relieved not to be the buyer after getting way to involved in an ebay auction.
posted by theora55 at 11:54 AM on September 28, 2006

I don't know whether a minimal eBay history makes it more or less likely that he is a sock-puppet

More, of course more! Think about Metafilter- if someone has been a member for 3 years and has made 5 comments and 300 comments, they're more likely to be legit then someone who is making their first post. Right? Yea, I'd definitely avoid buying this item from the "other bidder".
posted by ThePinkSuperhero at 6:54 PM on September 28, 2006 [1 favorite]