Wednesday, September 17, 2014

Four Reasons People Overbid

Overbidding--Why Shoppers Do It

Did you ever see other customers bid three or four times the value of the auction product and ask yourself, "Why on earth would anybody do that?" Now that I discovered the answer to that question, I sometimes decide to overbid, too, on purpose.

Of course, it might be impossible for us to know if another customer is overbidding. To know that, we would also have to know how much they paid for their bids. We might do the math based on the sale price of 14 cents a bid, because smart customers would always buy their bids on sale, right?  Some customers, however, might win enough bid packages to greatly reduce the cost they are actually paying per bid. When we earn our free bids, customers might not even put a monetary value on them because they did not have to pay for them.

Having said that, regardless of how much everyone is paying per bid, we all know that some customers consistently overbid. I believe there are four reasons some people overbid the value of the products on

1. Overbidding because they do not know they are doing it

Remember when you were a Newbie on  Remember how easy it was to get caught up in the excitement of discovering such an awesome bidding site?  Did you stop and do the math?  Probably not. This is most likely the main reason that Newbies often overbid. New customers simply get so excited about shopping on that they do not take the time to figure out how much they are actually spending.  Most likely, when the credit card bills come in, they will get a "wake-up call" and start to learn how to set reasonable limits.

All experienced bidders know that the closing cost of an auction, plus the cost of the bids used to win  the auction is the total cost of what we pay for the auctions we win.  On a "free to the winner" weekend, it is very easy to figure out because then the customers only have to worry about the cost of the bids it takes to win the auction. If we do not want to overbid the value of the product, however, we must add the closing cost of the auction to the cost of the bids it takes us to win it.  Once we reach the total value of the auction product, most of the time it makes more sense to BIN (Buy It Now) instead of win.

2. Overbidding to get more time on the clock

This is the main reason I will sometimes purposely overbid in an auction, but it is a little risky and you have to know what you are doing for this to work in your favor. You especially have to know who the other customers are and how they bid.

Once we have already invested enough money to equal the value of the product, the worst thing that could happen to us is to accidentally "win" the auction because then we cannot get our bids back free to use in another auction. At that point, it would be financially in our best interest to BIN instead.  So why would we  purposely choose to continue bidding?  To get more time on the clock toward earning our free bids.

For this to work in our favor, however, we have to be really sure that we are not going to win the auction. Let's say I invested my maximum number of bids and another power bidder jumps in near the end of the auction.  This bidder saved all their bids for the end and I already used mine, so I know I cannot outbid my competition. Also, if that bidder is from Texas, I am 90 percent sure that bidder will not let me win.  Therefore, it is rather safe for me to continue bidding to get more time on the clock. At that point, I am going to be forced to BIN and I will get all my bids back, anyway, so why not get more time on the clock?

3. Overbidding to teach "Bully Bidders" a lesson

 Let's be honest. After we have had our heart set on winning an auction and we already bid to our maximum, it is very irritating when the same "Bully Bidders" repeatedly jump in at the end and win the auction with only a few bids.  We might even scream at our computers, "That's not fair!"

One way to prevent that from happening, of course, is to avoid getting into the same auctions with the "Bully Bidders" that we know by reputation. However, that might not always work. We might be  trying to avoid them, but they might not be trying to avoid us.  Sometimes we have to stand up to a bully to teach them a lesson and make them think twice about jumping in on all of our actions.

I am not a vindictive person and I try to show respect to other bidders, but if we are going to shop on for a long time to come, we might choose to do some overbidding as a future investment to let certain bidders know that we are not "push overs" that they can beat all the time.

Whenever I saw a "Bully Bidder," I used to immediately cancel my bids and get out of the auction. However, if  "Bully Bidders" learn that they can jump in on an action any time they want and we will always back down and let them win with just a few bids, they will continue to do it, over and over again.

Therefore, we might sometimes overbid on purpose to force "Bully Bidders" to pay more. If they do not always get "a free ride" based on their reputation, they might think twice about jumping in on our action.We might have to teach them that they might not have such an easy win. If we make them pay a big enough price a few times, they will think twice about it the next time. In other words, we might have to make some "Bully Bidders" afraid of us, too ... so they try to avoid us as much as we try to avoid them.

4. Overbidding because they can

Unfortunately, when somebody overbids because they can, this is the worst kind of bidder to compete with because you cannot win.  When somebody is so rich that they have an endless supply of bids and they only bid because they are bored, forget it. 

These people do not care if they bid far beyond the value of the product because they are so rich, the loss of money does not mean anything to them.  The only reason these bidders are on the site is because they get their kicks out of having enough power to outbid everybody else. 


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