Understanding Penny Auctions
Auctions have remained attractive for many years, they are popular because you can get a great deal on all sorts of goods and items. The English way of conducting an auction is the one most commonly used. In this type of auction, the highest bidder takes home the goods.
The penny auctions introduce a new aspect in the auction industry, a fee for every bidder.
Also known as the bidding fee auction, every person intending to bid in the auction must pay a fee. This fee payment is what allows you to bid in the auction. It does not however guarantee you will win the auction. It is however half way towards making a grand deal.
The bidding fee charged in a penny auction is not refundable. You cannot go back and complain that you did not get to buy any of the goods on auction and be given your bidding fee back. This may seem unfair, but that is the rule that you sign up to when you decide to participate in a penny auction.
So, why should one take this risk?
This is often the question asked by people who feel that this is extortion. Whatever the case, what is clear is that you only have a chance in bidding after you pay the fee. This has the psychological effect of eliminating those who are not serious. Given that online auctions can attract anyone from any part of the world, the challenge for organizers is often to eliminate the tire kickers and fence sitters.
If you want to limit the chances of losing your bidding fee or spending it for nothing, then you have to be strategic before you pay a bidding fee in the penny auctions. Auctioneering is about assessing your chances of winning a bid.
Usually, this is dependent on the competitors. If you realize that your competitors have more money than you, or if the item being auctioned is attracting lots of competition, then you may as well not place the bid.
For the auctioneer firm, this arrangement is definitely a better business model. For one, the firm would be assured of making money whether the item is auctioned at a higher or lower than expected price.
The possibilities of people paying more money in bidding fees than the actual cost of the item are an attractive arrangement for the auctioneer. Of course this has brought a barred of criticism on penny auctions.
You however have a chance to decide, and should bid only if you want to!
