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Before
you begin selling, you need to understand the basic auction
formats. The most basic form, a straight auction, is fairly
self-explanatory. You list the item at whatever opening bid you
want, and the highest bidder at the close of the auction wins
the item. The other three common auction formats--Dutch, Yankee,
and reserve--are a little more complex. With that in mind, we've
put together some tips on when and why you would opt to use a
Dutch auction or its close sibling, theYankee auction. Also be
sure to review our tips on reserve
auctions.
The
Same But Different
Dutch and Yankee auctions are designed to facilitate the sale of
multiple quantities of an identical item. In other words, they
allow you to sell several models or versions of the same item
(identical videotapes, CD-ROMs, cell phones, or baseball cards)
in a single lot or auction. This way you don't have to list
these items separately, which would waste time, incur fees, and
be difficult to track.
With that said, there is a significant
difference between Dutch and Yankee auctions. In a Dutch
auction, all the winning bidders pay the same price for each
quantity; the amount is determined by the lowest successful bid.
In other words, even if you bid higher than the lowest
successful bid, you still pay the lower amount. In a Yankee
auction, the reverse is true. If you are one of the winning
bidders, you pay exactly what you bid.
Quantity
Counts
It's important to remember the word quantity when bidding on
either a Dutch or Yankee auction. Specifically, you may not be
bidding on just one item. A single bid may purchase multiple
items. In addition, bidders are not limited to a single
quantity. They can try to buy several quantities in a single
lot. Heck, they can even try to "buy out the
lot"--meaning that they buy every quantity.
Business
As Usual
Both Dutch and Yankee auctions begin just like a straight
auction. In fact, at the initial listing they more closely
resemble a straight sale than a reserve auction. Because every
item is identical, the seller can set one initial list price or
opening bid for all of the items. The opening price is set and
the competitive bidding begins. Unlike a reserve auction, there
is no hidden price, and the buyer does not have to guess how
much the seller believes the item is worth.
The
Aftermath
In general, Dutch auctions cause more trouble for sellers and
buyers than Yankee auctions. If there are ten items for sale in
a Yankee auction, the ten highest bidders win those ten items.
Also, high bidders receive priority over low bidders. As a
result, if the high bidder wants multiple quantities, he or she
will get them, and lower bidders will lose out. This might seem
like a raw deal for other buyers, but it's great for the seller,
who unloads more items at the highest price.
Dutch auctions are not as intuitive.
Routinely, questions arise about how the final price was
calculated and how the available quantities were doled out to
different buyers. To clarify, here are some general rules.The
final price in a Dutch auction is determined by the lowest
successful bid. In other words, the highest bids for each of the
available quantities win, and the lowest bid within that group
sets the final price. For example, if four people bid on one of
three Beanie Babies, the third highest bid would set the final
price.
It's a bit trickier if multiple buyers
are bidding for multiple quantities in a lot, such as three
baseball cards in a lot of ten. In this scenario, which is
commonplace, the high bidder is king. In other words, the high
bidder's request for multiple quantities will be respected,
while the lowest successful bidder will get the short end of the
stick. (On a related note: It's not good to be the lowest
successful bidder if you want multiple quantities. The highest
bidder will cash in, leaving you with one item, or less than you
wanted. A word to the wise: If you want more than one quantity,
don't be cheap with your maximum bid in the hopes of coming in
just under the wire.)
Back to Auction tips &
tactics
by Vendio Services
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