Question

Ebay.com started as a traditional auction site in which the bidding on an item lasted a specified amount of time, and the highest bid at the closing time was the winner. Most items on ebay.com are now posted with a set purchase price for the item, and any buyer who is willing to pay that price can purchase the item immediately. However, some items are still sold by auction (e.g., art works and other collectibles), and one piece of information provided for an auction is the number of existing bids. Based on the discussion of auctions in the book, what is the expected impact of the number of bidders on the sales price for an item? Should you adjust your bid as the number of bidders increases?

Answer 1

With the rising number of bidders, speculation increases. When there are more bidders, the prices of the product are likely to go high as everyone might think that the other person might be bidding more than me, so in order to grab the deal individual bidder will bid more. Leading to the increased price of the product.

Yes, one needs to adjust the bidding price according to the number of existing bidders. If the number of bidders increases, one needs to increase one's bid as the probability of someone else taking the deal increases. If there are less number of bidders then there are more chances that the individual can get the deal by paying less price also.

It all depends on probability, no outcome is hundred percent sure.