• The type of auction: Businesses should choose seller-biased auctions where there
are many buyers and only one or a few sellers, preferably using the English
ascending price system to drive the price up as high as possible.
• Initial pricing: Auction items should start with a low initial bid in order to attract
more bidders, because the more bidders an item has, the higher the final price
will be driven.
• Bid increments: When increments are kept low, more bidders are attracted and
the frequency of their bidding is increased. This can translate into a higher final
price as bidders are prodded onward in small steps.
• Auction length: In general, the longer an auction runs, the more bidders will
enter the auction, and the higher the final price will be. However, if an auction
continues for too long, the bid prices will stabilize, and the cost of posting the
auction may outweigh the profit from any further price increases.
• Number of items: If a business has a large quantity of items to sell, it should
break the lot up into smaller bundles and auction them at different times so that
buyers do not expect a volume discount.
• Price allocation rule: Because most buyers are biased toward the uniform pricing
rule, sellers should use different auction markets, or auction the same goods at
different times in order to price discriminate.
• Closed vs. open bidding: Closed bidding should be used whenever possible
because it benefits a seller by allowing price discrimination. However, open
bidding can sometimes be beneficial when herd behavior kicks in, causing multiple
bids on highly visited auctions, while overlooked and lightly trafficked
auctions for the same or comparable items languish. This generally occurs when
there are few objective measures of a product’s true value in the marketplace.