Why auction upwards?

An auction should ensure that an item realises its maximum value in the market at the time.  But all Trade Me auctions are set up as increasing bid auctions.  Why do we do this?

It doesn't make sense from a seller's point of view, unless you are in a commodity market.  Sure for milk, oil, timber, used cars and the like, the idea of an auction that starts at a low figure and works upward to one bid beyond what the second-to-last bidder is prepared to pay is a great way of meeting the market.

But for one-off items its dumb.  Must be why real estate agents love it. For a singular item (say a Paratai Drive property, a Ferrari, a Van Gogh, or a Lounge Lizards furniture piece!) the best way to achieve maximum value is by reverse auction, sometimes called a dutch auction.

In a reverse auction, the starting point is set at the highest price the seller thinks is possible in the market.  This offer is slowly lowered over the duration of the auction until a buyer bids in and the item sells.

There is no competitive bidding - the first bidder is the winner.  How is this an advantage to everyone?

Well, the seller is more likely to get the best price for the item because the potential buyers are encouraged to bid at the highest price point they see value - otherwise, someone else may bid and the item is lost to them.

Buyers have a complete certainty when they place a bid - if they bid, thats the final price.  No emotional blackmail as another bidder tops them a dollar at a time, no over-excited bidding regretted later.

This system does rely on the market having information - as many potential buyers as possible need to know an item is for sale, and the seller needs to have a reasonable idea what the value proposition is in the market.

So, we are giving it a go.

Its a little messy on Trade Me because they are not set up for it, but it can be done. If you see one of our pieces on Trade Me and its a reverse auction all you need to remember is that you use the Buy Now button at the earliest price you think the item has value for you.  Because otherwise, someone else may get it either at that price or at the next offer down and you will miss out...