The Psychology Behind Online Auctions

Last updated 6th September 2018

Online auctions are not just about buying a rare coin or a classic car for a good price (although of course, that part is also great!). Under the surface, many psychological processes influence the way we act. What makes bidders so eager to win the lot? And why do we desire an object more once we have placed a bid? 

It seems logical that asking for a higher price, or selling a lot at auction with a higher starting bid means that you'll achieve a higher price in the end, right? The opposite is usually more true believe it or not. The common belief about starting auctions with higher bids is rooted in the psychological principal known as 'anchoring'. But studies have shown that actually starting an auction with low bids generates higher returns in the end. More bidders are likely to bid when the opening bid is low, and the generation of more traffic increases bids.

When the bidding start low, more people are willing to bid, and more people get emotionally attached to the same item as they feel a temporary sense of ownership. We'll explain more about this later on, but remember that this drives bids higher and this is the reason that it can be beneficial to start an auction on Catawiki at just €1.

Did you also know that lots offered up with no reserve price sell for 29% higher prices in the end? So while it may seem counterintuitive to start bidding low and not set a reserve price, studies and experience show that this achieve the best results at auction.

Auction fever
Online auctions are different from traditional auctions, but they share many features. One of which is the rise in emotional bidding. Time pressure, knowing there are other people bidding on the same lot as you are, and desiring the object create a phenomenon called 'auction fever'. Your heart rate increases as you watch the time counting down in your pursuit of that one special object. Going once...going twice...

It’s mine!
Once we start bidding on a lot, something interesting happens: we feel a sense of ownership when we're the highest bidder. Pictures and stories about the particular object give us a vivid image of what it would be like to own it, and once we (subconsciously) believe we do, we don't want to let anyone else have it! When someone outbids us, the desire to become the owner again leads us to bid even higher. This is related to the Endowment Effect, which theorises that people will assign more value to an item that they own purely because they own it. The sense of ownership during an auction and the Endowment Effect result in bidders being more driven to become the winner.

Scarcity & nostalgia
There are several other psychological reasons behind why an item may appeal to us. One reason is nostalgia. Vivid images of a joyful past cross our minds when listening to your favourite song on vinyl or remembering our favourite childhood toy. It may seem backwards, but oddly enough the items that were mass produced and easily accessible in our past have gained the most value today. Why is that? When a toy, for example, was available everywhere, parents were more likely to get rid of it when the child outgrew it because it seemed to have no value. These items have since become scarce, and since they are still so present in many people's memories, they tend to be highly sought after. The nostalgia combined with the scarcity increases the value as well as the desire to have a special object from one's past.

Experience it for yourself

Do you want to experience some of these psychological effects from the seller's point of view? Try it out for yourself and see if you earn 29% more by offering up your objects for auction without a reserve price. The first step is to register as a seller. It's completely free and it's free to offer up objects for auction, so why not give it a try today?

You might also like these articles:

• - What Can I Sell at Catawiki’s Auctions?
• - How Does Catawiki Work?
• - Winning Bidding Strategies for Catawiki Auctions