Explain purpose of auction reserve

[jakemccoy]

deadin,

Regardless of how you look at it, the market value won't be accurate when fewer bidders participate due to a reserve that's known to be there for "testing the market".

Try this. Observe auctions on Ebay. You will notice that there is a feeding frenzy on an item in the last minute. If the reserve is known to be overly high, then there is no feeding frenzy because bidders know they cannot get the item. The result is a final bid that is not an accurate indication of the item's market value. More likely, there are no bids at all.

Change that "serious" to "bottom feeders" or "bargain hunters".
These are exactly the folks I don't want bidding on my auction in the first place, hence a "safety reserve".

If someone is serious about buying a gun, they will place at least one bid amounting to what they figure the gun is worth to them. If the "bargain hunters" figure that a reserve means they're not likely to get a steal, fine, go elsewhere. If I just want to get rid of my gun, I'll just take it to the local gun store and take whatever they offer. Saves me a lot of time and effort.

In your Post #20, you said that some sellers use reserve to "test the market". I was responding specifically to that. You're talking about something else in Post #24, where you're talking about using a reserve merely as a safety net for the seller.

Back to my point, bidders are not in the auction merely to reveal what they think the item is worth. If a seller is specifically "testing the market" with a high reserve and bidders catch on to the routine, then again serious bidders are not going to participate. The seller is not serious. Accordingly, the bidders won't be serious. For every action, there is an equal and opposite reaction.

The idea of an auction is that each side is taking a calculated risk. A high reserve that's intended to "test the market" removes all risk out of the equation for the seller. The market will eventually show the seller that bidders are not going to play with a seller who is known to play that game. Heck, all you have to do is read the posts here. Bidders don't like reserves.

By the way, a serious bidder is any bidder who shows up with money and intends to buy the item.

 

[jakemccoy]

I would like to see auction sites set limitations on what can be done with a reserve. For example, make it such that the reserve can be no more than twice the minimum bid or something like that. That's fair for both sides.

 

[kdave21]

There is a lot of psychology to electioneering, and there are two sides to every issue. One thing I want to point out however, not every as-is auction is because the seller is a crook. Talk to any dealer on gunbroker who has done a lot of sales, especially older or antique guns, and you will realize there are issues you probably never even considered, i.e. dishonest buyers who like to switch out parts, etc.

 

[deadin]

jake,
If you read my responses carefully I said that I would set a reserve at a level I would be comfortable selling at, not ridiculously high (in my opinion, not yours.)
The "testing the market" was merely a secondary benefit if my reserve is too high. Besides how do you know my reserve is "too high" if nobody bids? I may have a fair reserve to protect myself and if nobody bids, they won't know that I might be willing to sell a $500 gun with only a $350 reserve. Obviously a $10 bid isn't going to make the reserve.
Just as you apparently feel that it is not worth your time to bid on a reserved item, I feel it isn't worth my time to mess around with low-ball bids. A one-time bid at your comfortable limit may not exceed the reserve, but than again it won't ever be more than the reserve unless someone else decides that bidding on a reserve auction is OK. (And it only takes a minimum of effort, unless you are susceptible to falling into bidding wars. Then all bets are off.)
Oh yeah, I only may sell 2 or 3 guns a year via auctions, so I don't think anyone is going to notice my "testing the market" with high reserves and stay away. Were I a dealer with a high volume of sales, I could afford to sell without a reserve as everything would level out in the long run. With just a few sales, I can't take the chance of a large unintended loss.
I don't always use reserves. Sometimes I just set the starting price at my minimum. I haven't really noticed a whole lot of difference either way.
I do know it doesn't make any difference to me when I'm a bidder.

A comment on "Buy it Now". I've always looked at these as the premium you pay for not having to mess around with bidding and competing with others.
I will say that if the BIN price is way out of line, I usually figure any reserve is also probably out of line.

 

[DHJenkins]

Auctions are about who wants the item more and is willing to pay for it. "Fair" doesn't even enter into it. No one is forcing anyone to participate, and it costs you nothing to bid unless you win. If you don't like the way someone does something, don't do business with them.

The idea that people are somehow entitled to a great deal is just downright silly.

 

[deadin]

For example, make it such that the reserve can be no more than twice the minimum bid or something like that. That's fair for both sides.

Who ever said that auctions had to be fair? The auction site will do whatever they can to maximize their profit. If it allows reserves in hope of encouraging bidding wars, so be it.
Want to talk about fair? How about the "15 minute Rule". This is a great benefit to the seller and the auction house, but is an absolute PITA for the bidder.
It just allows the "nibblers" (or shills) to drive the price up. It all depends on if I am bargain hunting or not on whether I will even bother to bid on one of these.

We all have our hang-ups.

 

[jakemccoy]

Who ever said that auctions had to be fair?

Well, it's up to the site if they want to make the auction as fair as possible. I was making a suggestion that I think would be fair. Your knee-jerk reaction is an indication that my suggestion is "fair" or close to it. If I were an auction site, I sure as heck wouldn't be advertising, "Enter at your own risk because this auction isn't going to be fair for everybody."

 

[DHJenkins]

Well, it's up to the site if they want to make the auction as fair as possible.

Why would they purposefully lose the fees generated from starting & reserve prices? They're a business, not a charity. If you don't like it, don't use it.

Live auction houses, btw, usually charge a 10% 'buyer's premium' on every sale. That's not 'fair', but it's part of the game, so you bid accordingly.

 

[jakemccoy]

DHJenkins, you came in at the tail end of a discussion I'm having with deadin. I don't understand what you're talking about. I tried though.

=====

I'm talking about "fair" as in fair rules. An example of an unfair rule is the following: Bidders are not allowed to see the current bid or minimum bid for any auction. Nobody in their right mind would look at that rule and say to themselves, "That's fair." There are many other examples. Reasonable minds should be able to be civil enough to understand that there are fair rules and unfair rules. Again, it behooves the site to make the rules as fair and reasonable as possible. If you want to come up with another word besides "fair", then have at it.

 

[DHJenkins]

Auction sites charge fees for setting reserves, so I was pointing out that it's not in the sites best interest to attempt make things "fair". Reserves have been part of auctions for a very long time, and will continue to be - online or not.

 

[jakemccoy]

Auction sites charge fees for setting reserves, so I was pointing out that it's not in the sites best interest to attempt make things "fair". Reserves have been part of auctions for a very long time, and will continue to be - online or not.

OK, I understand that. Note that you said that auction sites charge a fee for setting reserves. So actually, the site is stepping in to make things "fair". Generally, whatever is going to keep the auction site running and profitable is naturally going to be fair in the long run. The bidders won't participate in a system that they think is clearly unfair for the bidders. So, the market will decide what is fair, whether we like it or not.

 

[scottaschultz]

Auction sites charge fees for setting reserves, so I was pointing out that it's not in the sites best interest to attempt make things "fair". Reserves have been part of auctions for a very long time, and will continue to be - online or not.

Have you actually sold anything on Gunbroker? I have!

Here is their fee schedule:
Standard Fees
Insertion Fee NONE!
Registration / Membership FREE!

Optional Services
Counter $0.50
Boldface Title $1.00
Colored Title $1.00
Thumbnail Image $.25
Highlight $2.00
Featured Listing $2.95
Showcase Listing $4.95

Of course there is also a "Final Value Fee" based on the actual selling price, but there are no fees of any kind, at all, whatsoever for setting reserves... period!

As far as being fair, the post their rules and even though they are known primarily for selling firearms, no one is holding a gun to your head making you buy there!

As my ex-wife's attorney told me after my reaction to the divorce settlement, "Mr. Schultz, FAIR IS A WEATHER REPORT!"

So, the market will decide what is fair, whether we like it or not.

I fixed it for you!

So, the market will decide what is fair, whether I, Jake McCoy, like it or not.

Scott

 

[nwilliams]

The reserve serves two purposes.

One purpose of the reserve that it allows you to safely test the waters by seeing how high people are willing to bid on your item. Unlike Ebay on gunbroker you only get charged once the item sells, so you can list it as many times as you want without relisting charges. So I always list a gun and then set a ridiculous reserve and buy it now price the first time around. Once the auction ends and the item doesn't sell it gives me an idea of what people are willing to bid up to. I'll then relist the gun and adjust the reserve closer to or even meeting the highest bid amount placed on the auction the first time around.

The second purpose of the reserve is to keep you from loosing money. Never place a reserve for less than you are willing to accept for the gun being sold, unless you are really desperate to sell.

 

[earlthegoat2]

While gunbroker can not stop you from putting a reserve on an item, they do advise against it since they get a lot of complaints.

Doubt it man. Reserves make items sell for higher prices IN GENERAL and GunBroker reaps the rewards. Of course people complain. They are gun people. Gun people are without a doubt the most picky yet not specific, opinionated, hard to please, and stubborn folks out there. Naturally they are going to complain about reserves. We are talking about people who do not want the gun out of the display case because other peoples hands have touched it and it is supposed to be a new gun or that there is a used gun and there is a scratch on it so it should be even less than the used price. Then of course anything that influences price would also enrage them.

I am a bottom feeder. GunBroker is not friendly to bottom feeders. They have tools at hand that protect sellers from bottom feeders. Mainly reserves that are free, listings that are free, and any start prices that are free. Use the Advanced Search function and search for "pure auctions" (penny starts and no reserve) that is where the bottom feeders congregate. This is where you have the only chance to get a sweet deal and believe me you are not going to because everyone already knows about this.

Change that "serious" to "bottom feeders" or "bargain hunters".

Hey take it easy. I can read this too you know. That is why I only bid and watch items with no reserve.

 

[mustang_steve]

Simply put....it allows a seller to find out what the community considers a fair price for it, without the risk of selling the item for less than he desired.

I dislike reserve auctions in general....I feel if someone wants to do that, just set the starting bid at the price they want in the first place.

 

[deadin]

I am a bottom feeder.

earl,
At last! An honest man willing to admit it.
I am one also but I don't let a reserve keep me from posting a low-ball bid. After all, it doesn't cost me anything and only takes a few seconds of my precious time. (Cheap entertainment.)

And then there's the philosophy that you can't win the lottery without buying a ticket.

 

[RP88]

the testing the market makes sense, though. It's what i would do. It's capitalism. You don't have to buy it. And at the same time, don't expect people to just give it away to you.

On a side note: It's funny how people looking for deals whine about the market and call sellers dishonest, yet when they do come across a steal, they'll lie and/or shut up about the price and not bother to say "Oh! only ____ bucks? That's a really good price! How come you aren't selling it for ______ bucks like everyone else?"

 

[jakemccoy]

On a side note: It's funny how people looking for deals whine about the market and call sellers dishonest, yet when they do come across a steal, they'll lie and/or shut up about the price and not bother to say "Oh! only ____ bucks? That's a really good price! How come you aren't selling it for ______ bucks like everyone else?"

I do that. I'm sure there are many other gun buyers that do that too. I do it for my benefit. I would like to poke around and see if it's at a low price because something is wrong with the item. An honest seller might say something like, "I can't in good conscience sell this gun at a premium because the darn thing jams on me at least once every 100 rounds."

There's nothing unethical about realizing that it's just a business transaction. The motivation behind a pure business transaction is making money or receiving a good deal. I'm a fair, honest businessman who tries to operate always in an ethical manner. However, make no mistake that my motivation in business is to get a good deal for myself, whether I'm the buyer or the seller.

 

[stchman]

Reserve auctions are 100% completely retarded.

If you want a minimum of say $300 on an item then start the biding out at that number. Don't start it out at 1 cent or something really stupid like that.

On any auction site I do not even bother with reserve auctions. I look for some kind of buy it now type.

 

[RP88]

I do that. I'm sure there are many other gun buyers that do that too. I do it for my benefit. I would like to poke around and see if it's at a low price because something is wrong with the item. An honest seller might say something like, "I can't in good conscience sell this gun at a premium because the darn thing jams on me at least once every 100 rounds."

that is why you inspect the gun yourself. Or maybe understand that you may drop some cash for replacement of some parts, but in the long run still get a good deal or at least save a bit of cash. You can also make sure that sellers have warranties or conditions for selling damaged merchandise in case he does sell you a lemon or a busted gun.

 

[jakemccoy]

that is why you inspect the gun yourself. Or maybe understand that you may drop some cash for replacement of some parts, but in the long run still get a good deal or at least save a bit of cash. You can also make sure that sellers have warranties or conditions for selling damaged merchandise in case he does sell you a lemon or a busted gun.

I do that too, thanks for clarifying.

 

[NC Cruffler]

Prior to my tragic boating accident, a large number of my firearms had been obtained from Gunbroker (A+61 rating) or Auction Arms (100% 10 rating).
I NEVER bid in a Reserve style auction as I thought they were a waste of my time. In fact, on my feedbacks from sellers I added a comment stating "OTHER SELLERS- I do not even consider bidding on RESERVE type auctions!"
I would rather the seller put a starting price at the level he would accept for the item and let any bidders take it from there.
Dave

 

[WardenWolf]

In my personal opinion, reserve prices are dishonest. They sucker people in with a low starting bid, then go, "Oh wait, your bid wasn't good enough, even though no one else outbid you." This type of thing discourages further bidding because you're not even bidding against someone else, you're just bidding against some unknown reserve price and your bid may be artificially inflated to the max you're willing to pay even with no competition. I will never use a reserve price on any auction I make, and avoid bidding in auctions that have a reserve price unless it has already been met.

 

[NC Cruffler]

Prior to my tragic boating accident, a large number of my firearms had been obtained from Gunbroker (A+61 rating) or Auction Arms (100% 10 rating).
I NEVER bid in a Reserve style auction as I thought they were a waste of my time. In fact, on my feedbacks from sellers I added a comment stating "OTHER SELLERS- I do not even consider bidding on RESERVE type auctions!"
I would rather the seller put a starting price at the level he would accept for the item and let any bidders take it from there.
Dave

 

[deadin]

Question and a comment....................
Question:
For you reserve haters that say you will not bid on a reserve auction. Does this mean you won't bid, period, ever or you won't bid until the reserve is met by someone else.

Comment:
I hope you mean what you say and refuse to bid on anybody's auction that has the nerve to use reserves. That just make less competition for those of us that reserves don't bother.