There’s an old adage that says numbers don’t lie, and representatives with EHE Auctions, say that based on statistics, the company is now incorporating the researched proven strategy of low starting opening bids.
“Often you see auctions that will have an opening bid of 50 percent or 70 percent of the market value of the equipment,” said Milissa Wise, Director of Operations for Expert Heavy Equipment, the parent company of EHE Auctions, which is owned and operated by former Marines, two of which are female. “All of our bids open at a max of $100, because research shows that low rather than high opening bids generate high selling prices.”
EHE Auctions provides a service for individuals and companies that want to dispose of their used heavy construction, industrial and farm equipment.
Unlike most auction companies that charge sellers fees, plus 3 to 18 percent of the sales price, with EHE Auction, there are no consignment or listing fees.
When it comes to bidding, Wise pointed out that the traditional belief is that a high first offer results in a high selling price.
“This belief is rooted in a psychological principle known as anchoring,” Wise explained, before adding, “The numerical value of an anchor sets the tone of the item for auction. Furthermore, a high opening bid can spark the rose-colored-glasses effect, leading bidders to focus on the more positive features of an item. But this belief has been proven to be false.”
Wise went on to note that recent research conducted by Adam Galinsky and J. Keith Murnighan, professors in the Management and Organizations Department of the Kellogg School of Management, and Gillian Ku of London Business School, turns tradition upside down.
In a paper published in the Journal of Personality and Social Psychology, the researchers, Wise said, show that low rather than high opening bids generate high selling prices, demonstrating a reversal of the anchoring effect.
In addition, the researchers also verified that lower starting prices led to more bids and more unique bidders, indicating that traffic contributed to escalating the final price.
Probing in more depth, according to Wise, the researchers wondered what psychological factors contributed to the bidding fervor produced by low starting prices.
Perhaps low starting prices engaged people and made them more committed, leading them to place more bids.
“Because you lower barriers to an auction, you get them to invest time and resources,” Galinsky said.
