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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!
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!
