| Principles of reserve price auctions (Aukro) |
Reserve price auctions are quite specific in their nature.
Until people place bids that are lower than the reserve price established by the seller, the auction proceeds as normal.
The main difference comes in when one person places a bid that is higher than the reserve price.
At that point a bid equal to the reserve price is displayed even if a smaller amount was required to outbid other bidders active in the auction.
Example:
An item is set to have a reserve price of 100 USD.
Let us assume that the situation progresses as follows:
- Kowalski – 51 USD (51 USD is Kowalskis maximum offer)
- Nowak – 50 USD
The reserve price has not been met.
Now lets analyse the following scenarios:
-
Mr Abacki joins the auction by placing a bid of 70 USD
Then the current situation should be as follows:
- Abacki – 52 USD
- Kowalski – 51 USD
- Nowak – 50 USD
The reserve price has not been met.
It is quite clear the current maximum offer is barely higher than the previous bid.
The auction is still in a draw as no one has reached the reserve price.
-
Mr Abacki joins the auction by placing a bid of 70 USD
Then the current situation should be as follows:
- Abacki – 100 USD
- Kowalski – 51 USD
- Nowak – 50 USD
Thus mr. Abackis’ current bid is 100 USD, and it is the reserve price for that auction.
It does not matter that 52 USD was enough to outbid the previus offer.
Conclusion:
In reserve price auctions your current offer depends not only on the maximum bids of your opponents but also on the reserve price that has been chosen by the seller.
See also:
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