Winner's Curse – How often do you win at auction?

[Nupero]

Recently I went through my won/lost list of watch auctions and found out that I win about 60% of the lots that I bid on. That got me thinking if there is an optimal "K/D ratio" in bidding wars. What do you think? What's your winning percentage?

I also found an article which I think is pretty interesting: The Winner’s Curse and Optimal Auction Bidding Strategies

The article focuses on closed auctions where sealed bids are submitted simultaneously and the winner is the individual submitting the highest bid. So it's not entirely relevant to vintage watch collecting because watch auctions are almost always open, but there are a few interesting points:

"The competition amongst bidders in auctions often results in a phenomenon termed the “winner’s curse,” an outcome in which the winner prevails by submitting a bid that is not only higher than competing bids, but also higher than the true value of the item."

"In addition, common basic findings in virtually all research on auctions indicate that bidders should be aware that the winner’s curse is most severe in the following situations:
1. Bidders have less information than their competitors,
2. There is significant uncertainty about the true value of the item being auctioned, and
3. There are a large number of bidders"

"When bidders do not hedge their value of an item in a competitive auction, they will likely pay too high a price for an item, if they win an auction."

To avoid paying too much (while maintaining a decent chance to win) the article suggests bidders should use a hedge of 20 to 40 percent i.e. bidding only 60-80% of expected value. Sounds like a solid strategy to me, even in an open auction when you are bidding on an uncollectable watch or the seller's pics are blurry which means you are in a sense playing a game with incomplete information. Just like poker. No wonder auctions are so much fun!

 

[Dan S]

Probably less than 5% for me.

 

[Nupero]

Dan S

Probably less than 5% for me.

Wow, that sounds really low. Disciplined approach. I'm fairly certain you are free from winner's curse So what % do you bid of true/expected value?

 

[Dan S]

Nupero

Wow, that sounds really low. Disciplined approach. I'm fairly certain you are free from winner's curse So what % do you bid of true/expected value?

I can't say that I really think of it quite that way. If "true" value is related to previous auction prices, then I can't see how you would ever expect to win an auction by bidding 60% of that. I'm not averse to taking a risk on a watch that interests me, but I already have a collection of watches that I enjoy, so I don't usually get too emotional about buying another one. Often there's someone else who wants it more.

Edited: Aug 2, 2022

 

[connieseamaster]

95%

But that's mostly because I'm bidding on things that are non-competitive (ie I'm the only one putting in a bid). The few times I've knowingly overpaid (according to the market at the time) for an item were because the value of owning the item was worth more than the market value. Yay sentiment! My max price is the price I think it's worth, modified by my anticipated disappointment if I don't win it and the probability of the same watch in similar condition coming up for auction in the next 6 months.

 

[Nupero]

Dan S

I can't say that I really think of it quite that way. If "true" value is related to previous auction prices, then I can't see how you would ever expect to win an auction by bidding 60% of that. I'm not averse to taking a risk on a watch that interests me, but I already have a collection of watches that I enjoy, so I don't usually get too emotional about buying another one. Often there's someone else who wants it more.

I see. If you only win less than 5% of auctions and do not make low bids (i.e. 60% of value) then I'm guessing you mostly bid on watches that are highly collectable with a large number of bidders? Which would mean the watches almost always reach 100% of their expected value.

I collect affordable and uncollectable models. In that realm it is quite normal to win an auction with a 60% bid as the competition is often soft. Sometimes I overpay (around 50% extra, max) if the condition is really nice, but that does not happen all that often.

 

[Dan S]

Nupero

I see. If you only win less than 5% of auctions and do not make low bids (i.e. 60% of value) then I'm guessing you mostly bid on watches that are highly collectable with a large number of bidders? Which would mean the watches almost always reach 100% of their expected value.

I collect affordable and uncollectable models. In that realm it is quite normal to win an auction with a 60% bid as the competition is often soft. Sometimes I overpay (around 50% extra, max) if the condition is really nice, but that does not happen all that often.

I understand what you are saying, and I guess that I am usually bidding on fairly collectible watches. TBH, I am often the underbidder, so the hammer price is just one increment above my bid. It's easy to get caught up in the moment, but there will always be another watch, so sometimes you just have to let it go if someone else wants it more.

 

[Davidt]

I’d say my hit rate is also low. Generally maybe 10-20% unless I push the button and go nuclear in an auction I’m willing to go hard on for a random reason.

I would also say that I’m often the under bidder. Particularly in actual auctions (opposed to eBay) but my hit rate has increased over the last few months, possibly due to the market softening either as its summer or as part of a longer term trend related to people’s discretionary spending

 

[RevZMan123]

All that being said, do you bid early at a max price or do you snipe to win at all costs. That's usually the final arbiter of whether or not I'm going to win an auction or not. If I'm willing to pay whatever, I still like the thrill of the countdown. Expect when they changed it to add a confirmation and I almost missed a sniped auction but I gave myself 5 seconds instead of my usual 3 seconds that time. Victory!

 

[Davidt]

Depends.
If I’m bidding in a bricks and mortar auction I rarely, if ever, attend in person, but leave an absentee bid.
On eBay I do tend to bid at the end unless i might not be able to log on. In that case I’ll enter my max mid as late as possible.

Similar to Dan I own quite a few watches and have owned a large number over the last ten years so unless it’s something really specific or an item that sings to me (generally due to barn find condition, great dial, uncommon reference etc), I don’t feel the need to enter a win at all costs bid. I know another will be around the corner and as I enjoy the hunt, I’m generally content to wait.

 

[Dan S]

RevZMan123

All that being said, do you bid early at a max price or do you snipe to win at all costs. That's usually the final arbiter of whether or not I'm going to win an auction or not. If I'm willing to pay whatever, I still like the thrill of the countdown. Expect when they changed it to add a confirmation and I almost missed a sniped auction but I gave myself 5 seconds instead of my usual 3 seconds that time. Victory!

Be careful with those "win at all costs" snipe bids. I've seen many auctions where two people use that strategy at the same time.

 

[fibonacci]

In a limited time, second price auction (like ebay, where you pay marginally more than the second-highest bid no matter how much higher your max bid was), you want to snipe. The amount you want to snipe is the maximum you would be willing to pay. If you make your max bid early, you are revealing information to other participants about the value of the item. You also increase the probability that someone will outbid you for reasons of emotion rather than rational valuation (as often happens in English auctions).

I would guess I win 50% of ebay auctions I participate in. However I do look at quite a few where the price is already higher than I care to bid.

 

[RevZMan123]

I've always been a sniper for auctions, I just like seeing the result quickly. I may end up taking a chance on one of the finds you guys posted recently, so I'll have to leave a bid as I have something going on at end time.

 

[RevZMan123]

Dan S

Be careful with those "win at all costs" snipe bids. I've seen many auctions where two people use that strategy at the same time.

Yeah, that has happened once or twice in my tenure on ebay. I used to use programs to do it too but they've made it harder and harder. Manual is more fun anyway but overspending isn't always fun either.

 

[Nupero]

I rarely snipe. Maybe I should do it more often. I just place my max bid and call it a day. Some auctions have a 5 min anti-sniping feature which I greatly appreciate.

Sometimes it can be advantageous to be an early bidder. I have noticed that some folk (newbies) seem to get emotionally attached to an object if they are the winning bidder in the early stages of an auction and then they will not give up, nope, those maniacs are willing to pay what ever it takes to get that watch. But on average sniping seems to be the best tactic.

 

[ghce]

95%

I only go crazy when it's something I really like and I only buy what I like, do I over pay? Yes, do I care? No.

There is plenty of time to regret not buying a rare or much wanted item for the collection after the auction, you only live once, enjoy what you buy.

 

[RevZMan123]

ghce

95%

I only go crazy when it's something I really like and I only buy what I like, do I over pay? Yes, do I care? No.

There is plenty of time to regret not buying a rare or much wanted item for the collection after the auction, you only live once, enjoy what you buy.

no regerts

 

[johnireland]

I either get the item at the price I want to pay...or I don't and I walk away with zero regrets. In that sense I feel like I always win.

 

[Olhenry56]

I have only bought a handful of watches on eBay. I learned that for me it is best to bid at the end of the auction. @fibonacci nailed the main reasons why, and I also learned that on a fixed budget like mine, I sometimes find myself regretting a bid on one watch because I found another I liked better and I'd have to either wait to lose the first one or risk winning both. I've used gixen (learned about it recently here on OF) a few times to bid in the last moments, but I haven't won any of those auctions yet. I'd guess my win/loss ratio is around 20%.

 

[Olhenry56]

Oh, but I will bid early on auctions with a moderately high starting bid, but only $1 more than the starting bid. I figure that some bidders will be scared off by the already large bid and the possibility that my max bid is much higher. Then if that doesn't work, I'll snipe if it's worth it to me.

Edited: Aug 3, 2022