"Counterintuitive" insight into auction bidding

by Madison Utley24 Apr 2019

Amidst a holiday-caused auction market slump, a study has shown that – despite the law of supply and demand – the more bidders involved in an auction, the weaker and less enthusiastic the bidding is likely to be.  

Economists at the University of Sydney and the University of Technology Sydney conducted research which revealed that as the number of bidders climbs, individuals perceive their probability of success as decreasing and are therefore less motivated to make competitive bids.    

Professor Agnieszka Tymula of the University of Sydney called the dynamic “counterintuitive.”

She explained, “Usually auctioneers would assume that the more bidders there are in an auction, the more money they will make – the logic being that that the more bidders there are, the more likely it is that there is a bidder with a high willingness to pay for the goods.

“However, it turns out that there is also a downside to having more bidders – most people bid less.”

The surprising result coincided with the auction market deviating from the generally upward trend it has exhibited in the past few weeks, likely in response to the long Easter weekend.

According to the CoreLogic weekly market report, only 378 homes were taken to auction across the combined capital cities last week, marking the least Easter activity since 2012.

Of the 378 auctions, just 48 took place in Melbourne despite it typically being the largest auction market in Australia.

Kevin Brogan, CoreLogic national auction market commentator, predicts the Anzac Day holiday on Thursday to further “impact the rhythm of the market.”

“I think it’s likely going to be the following week before we see the auctions come up again,” he added.