Overtime Bidding – Hard Closing, Soft Closing and Extension Periods
Since Marriott & Co. started using Online Auctions, we have run the auctions with a “soft close” that is to say that there is overtime bidding, if a bid is received within the last ten minutes of a lot closing then the closing time of the lot will extend by ten minutes ad infinitum. This is different to a “hard closing auction” where the closing time is fixed and does not extend, used on sites such as eBay. The advantage of the soft close for both auctioneers and bidders is that it prevents “sniping” where bids are placed in the last seconds of the lot closing and bidders not having enough time to react. Roth and Ockenfels excellent study on Last-Minute Bidding in 2002 found that late bidding is surprisingly common with the following patterns found with hard closing lots:
1. 20% of all bidders submitted bids in the last hour.
2. 13% of all bidders submit their bids in the last five minutes.
3. 50% of all bids are submitted in the last five minutes.
4. 37% of lots had bids in the last minute.
5. 12% of lots had bids in the last ten seconds.
The soft closing of a lot effectively means that bidders, if paying attention, will never run out of time, only funds. Marriott & Co. currently use a ten-minute extension, which in the past has meant that lots scheduled to close at 3pm have ended up closing at 7.30pm. Whilst this maximises the realisation for the client and gives ample opportunity to bidders, it is also inconvenient for both bidders and the auctioneer for the closing of a sale to drag on for so long.
To remedy the above, going forward Marriott & Co. auctions will be reducing the overtime period from ten minutes to two minutes. Retaining the advantages of the soft close but also dramatically reducing the ability for the closing of a lot to drag on into the night, which can allow bidders to get distracted or simply bored. Bidders will still have sufficient time to act and react but the reduced period should also add a sense of urgency and allow bidders to focus on the task at hand.
John Stickland, Auction Manager, Marriott & Co.